Ladies and gentlemen, thank you for standing by, and welcome to the Cognizant Technology Solutions Second Quarter 2008 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Hannah Sloane from Financial Dynamics. Please go ahead.

Thank you, operator, and good afternoon, everyone. By now you should have received a copy of the company's second quarter 2008 earnings release. If you have not, please call our offices at 212-850-5600 and we will send you a copy. The speakers we have on today's call are; Francisco D'Souza, President and Chief Executive Officer; and Gordon Coburn, Chief Financial and Operating Officer of Cognizant Technology Solutions. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. I would now like to turn the call over to Francisco D'Souza. Please go ahead, Francisco. Francisco D'Souza: Thank you, Hannah and good afternoon, everyone. Thank you for joining us today for Cognizant's second quarter 2008 earnings call. I would like to do few things this afternoon first provide an overview of highlights of our second quarter results. Second, discuss the trends we have seen particularly relating to the demand environment for our services in light of the economy climate. And finally, put some color around our guidance for the third quarter and the remainder of 2008. As usual I will be joined on today's call by our Chief Financial and Operating Officer Gordon Coburn. Our financial results for the second quarter of 2008, exceeded our prior guidance and demonstrated continued industry leading growth despite a very difficult macro economic environment during the second quarter. In addition as Gordon will discuss in a few minute most of our operating metrics remain strong during the quarter. While we deliver solid performance in the second quarter by continuing deterioration in the economy in the latter of part of Q2 and in the first part of Q3 has led us to reduce our outlook for the full year 2008. 90 days ago when we provided our prior 2008 outlook we were seeing pressure and portions of the financial service sector. But, the remainder of our portfolio continue to stable. We also noted during our last earnings call that in difficult economic time clients are likely to increase their offshore spending in order to get more done with the same of your budget dollars. When we look at our actual results in Q2 the good news is that our financial services portfolio saw and improves stability. Actually growing slightly above the company average on a sequential basis. However, as the quarter progressed we begin to see the impact of the economy affecting clients across other industries. While this trend in Q2 was most clearly evident in the healthcare segment anecdotal evidence that we have from conversations with customers outside of healthcare and financial services indicated that the affects of the slowing economy will impact other industry groups during the back half of the year. Due to the spread of caution amongst our client base, we are taking the conservative approach in resetting 2008 guidance to be at least $2.81 billion. While we are disappointed that our full year performance will be below our prior expectations. We feel comfortable with this revised growth target for 2008, and believe that the drivers of demand remained intact in our business. Cognizant continue to lead our sector in growth and many business development metrics in our business remain at high levels both in relative and absolute terms. Our pipeline of large deal is strong and in the past 90 days we've had a number of strategic high profile competitive wins. As we discussed on our last call client satisfaction continues to increase and we see opportunity with our base of 500, over 500 clients as they continue to globalize their businesses and utilize a broader portfolio of our services. In addition with your comfortable and maintaining our operating margins on a non-GAAP basis with the historical target range. Let me now provide some additional color around our financial and operating results for the second quarter. We exceeded our guidance for revenue generating $685.4 million in revenue an increased of 33% over the second quarter of 2007. When we recorded $516.5 million in revenue and an increase of 6.6% sequentially from $643.1 million in the first quarter of 2008. We saw, better than expected growth in financial services which grew 7% sequentially and 29% year-over-year. This may appear counter and cumulative given the headlines we all read. But, it's the results some of our U.S financial services client starting to increase the proportion of work they are doing and also provider as the way to reduce their aggregate IT and operation costs. These organizations are taking the advantage of the opportunity presented by the slowdown to continue to invest in order enhanced their competitor position or cost structure offsetting the relatives strength in financial services our healthcare segment was weaker than expected recording 3% sequentially growth and 39% year-over-year growth. I'll provide a deeper look into our healthcare performance in Q2 in a moment Manufacturing retail and logistics grew 10% sequentially and 38% year-over-year. And our other segment, which includes communication and information, media and entertainment and high technology grew 7% sequential and 29% year-over-year. In terms of geographies; Europe, is still showing strength, growing 83% year-over-year, and 15% sequential and rising to 20% of our revenues, from 19% last quarter. This steady growth results of our focus efforts to increase our presence in this geography. Our partnership with T-Systems continues to move forward and the pipeline of join opportunity is building. Finally, has we've been saying for sometime, we view IT infrastructure services, and business process and knowledge process outsourcing as significant opportunity, since these areas are generally under penetrated areas from an offshore standpoint. During Q2 combined BPO and KPO revenues, increased 19% sequentially. Of-course this must include contacts since our BPO revenues are still comparatively small. I.T infrastructure services also show strong growth increasing 15% sequentially. ITIS revenues now represent about 5% of total revenues. If I can summarize our Q2 results I would characterize the quarter as one where we continue to see pockets of strength offset by areas of weakness. This phenomenon of strength and weakness at the same time is the result of multiple trends occurring simultaneously in our markets. I would like to now spend a few minutes providing you with detailed, qualitative and quantitative information about demand resulting from these cross trends and the resulting affect on our outlook. The first trend is our clients and industry beyond financial services reassessing their budgets, reprioritizing spending and elongating decision cycle as business and consumer confidence deteriorated further. We saw this in particular within Healthcare where revenue grew 3% sequentially during the quarter compared to 10% in the first quarter. As we were look into our healthcare growth in Q2 reviews that spending amongst our life sciences customers was weak as they pulled back plans for discretionary spending due to the economic environment and also the tremendous pressure facing that industry, resulting from drug safety, government, and regulatory issues. As we look forward to the remainder of the year, we also anticipate slower growth within the payor segment of healthcare, largely driven by one of our top five clients in the payor sector, who has informed us of plans to scale back spending significantly in Q3, Q4 as a result of business pressure, they are currently facing. While they expect to reduce spending, it's also worth noting that we continue to represent a substantial proportion of this company offshore spending and we expect them to continue to remain solidly in our top five client list. In financial services, although we saw a recovery to some extent in Q2, compared to Q1, we continue to maintain a cautious view for the remainder of the year, principally due to the continuing turmoil in the industry and likely possibility that the economic situation will extend beyond the U.S to impact our customers in Europe. In terms of other industry sectors, we are also taking a conservative view for the rest of the year, as we anticipate that the affects of the slowing economic will impact each of our segments. However, offsetting this first trend our several trends, which by contrast our driving demand for our services. The second trend we have seen in the market is a shift towards increase spending with also provider as a result of intensified pressures to find cost efficiencies. In the second quarter we witness this trend amongst our financial services client base were we saw growth slightly above the company average and ahead of our earlier expectations. As an example, one midsize U.S bank which whom we have been working since December, 2005, recently expanded its relationship with us in order to significantly reduce its costs. Our engagement with this client had previously been limited to individual application development projects with no long-term continuity. We defined the solution for enhancing the margins, the bank has decided to outsource the maintenance of its IT application portfolio to Cognizant after we helped identify savings opportunities with several million dollars. In addition to providing cost savings, Cognizant will work with the bank's technology and operations group to enhance product development as well as to enhance business and its agility and speak to market. We continue to these strong evidence that forms like Cognizant will benefit from this trend as companies across industry groups come under significant pressure and look to increase offshore IT and other services during difficult economic times. The third trend in the market is towards increased adoption offshoring and new service areas beyond the traditional IP outsourcing, in particular BPO and IT infrastructure services. As I mentioned earlier, growth during Q2 in both our BPO and KPO and our IT infrastructure services lines was strong. In addition to being strong revenue opportunities in their own rights, ITIS and KPO and BPO are proving to be opportunities for us to establish relationships with clients, we may not already have an established relationship in the IT area. To provide you some color during the quarter, the BPO practice won a number of engagements, which include providing application... application processing, policy management, account management. And sales support for to a major in trends carrier providing manual claims processing to a leading pharmacy benefits processing business and providing retail point of sales support for a leading media retail outlet network of hundreds of outlets stores across the U.S.. We've also made consumer headwind in IT infrastructure services, which represents... which represented 5% of revenues in the second quarter. We are seeing success by leveraging our on target platform from the AimNet acquisition with our clients. This provides our clients with an integrated management platform of tools processes and automated workflow. During the first half of 2008, we won a number of yields including implementing a multi tower infrastructure management and support for our healthcare business processes provider, implementing a server management... excuse me, a server infrastructure management and support for a worldwide research base pharmaceutical company and providing support for key data center consolidation initiative for a leading provider of merchant processing services. The final trend we are seeing is a reaction by clients to the secular changes that they are experiencing in their respective industries unrelated to the current economic environment. Secular pressures also lead to the need to the for consulting services, process design services, and deployment of new technology in order to address evolving market dynamics. As a result of this trend, we continue to see growth in our application development services which grew 32% versus the second quarter of 2007 and also across a range of our horizontal services including areas such as ERP and testing. As an example, a retailer that is facing dramatic changes in its market and needs to aggressively modernize recently, recently expanded its relationship with Cognizant to include many mission-critical applications beyond application support. We are helping them to deliver strategic initiatives such as digital content distribution to make their company more competitive in their changing marketplace. The net results of all of these trends is that while we anticipate continued lumpy demand over the rest of the year due to the impact of the economy and other industry pressures on our clients, we remain confident about the fundamental drivers of demand for our services. An indication of this is our pipeline of large deals, which continues to remain strong. Now let me turn to guidance. In light of the weakening economy, we are no longer tracking to our prior forecast of approximately 38% revenue growth for the full year. Our prior outlook was based on the prevailing business and economic conditions tree months ago. Although our financial services portfolio stabilized, we are seeing a further weakening in the economy and these economic pressures are affecting our clients across other industries. Given the decline in business and consumer confidence that have occurred, we now have a more conservative view of the economic outlook and have adopted a correspondingly more conservative approach to Q3 and the full year 2008. In the interest of caution, we have reduced our outlook and we now expect revenues of at least $723 million in the third quarter, and 2.81 billion for the full year of 2008. I feel it's important to put our second quarter results and expected 2008 results into context. Our second quarter sequential growth and guidance for Q3 are at the top of our peer group. We believe that relative performance compared to our peer group is the best indicator of our competitiveness. In this tightening environment, we continue to increase our market share, and we are still benefiting from the investments that we have made over the years to gain advantage in the market. As we look forward, our objectives for the remainder of 2008 and beyond are clear. While we cannot effect what is outside of our control, we are focused entirely on running our company in a prudent manner while at the same time making the necessary investment to ensure that we emerge from this period of economic uncertainty as a stronger more competitive organization. Our priorities going forward are as follows: first, we will maintain our focus on our bottom-line. We will continue to optimize cost efficiencies and increased utilization during the remainder of the year, maintaining target operating margins within the 19% to 20% range on a non-GAAP basis. We believe we can deliver this... still protecting our core areas of investment in U.S. services maintaining our geographic growth and deepening our vertical industry capabilities. Second, working with our customers to demonstrator pro actively how offshoring across IT, IT infrastructure services, and BPO and KPO can be an effective tool to reduce cost and deliver more during tough economic times. And finally, ensuring that we maintain our investments in areas that will generate growth and position us best in the economy recovers. To that end, we continue to remain focused on building distinctive positions in each of the markets that we serve and deepening our consulting and domain capabilities in each of the industries we serve. For example, during the second quarter, we completed the acquisition of Loss Angeles-based management and technology consulting firm, Strategic Vision Consulting or SVC, which has strengthen and accelerated our presence in the media in entertainment verticals. SVC has a specific focus on studios and offer services in media asset management, digital asset management, physical asset management, license, electronic, downloads, price management, artist payments, and financial systems. This is a complimentary fits into our service offerings and global delivery model will allow SVC to immediately expand its footprint and wallet share with its current studio clients. In summary, as we look to the full year 2008, while we are disappointed that our full year performance will be below our prior expectations, we remain optimistic about our ability to best position the business for future growth, continue to outpace the industry average, and emerge from the economic environment in an even stronger position. Our pipeline of new business with existing new customers is robust. The trends I enumerated earlier demonstrate that while some clients are slower to make decisions and tightening their spending, there are also opportunities from which we can benefit as many clients turn to Cognizant as a solution for optimizing their cost efficiencies and helping them adapt the changing industry environment. While these trends show signs of persisting, Cognizant will remain well placed to continue to grow its business. Now I'll turn the call over to Gordon, who will walk you through our financial and operating results in greater detail.

Thank you Francisco, and good evening to everyone. I'd like to provide some additional information on the second quarter, and then discuss our financial expectations for the third quarter and the remainder of 2008. As Francisco mentioned, quarterly revenue grew 6.6% sequentially and 33% year-over-year. During the second quarter, our financial services segment, which includes our practices and insurance, banking, and transaction processing grew by over $71 million year-over-year and represented 45.8% of revenue for the quarter. Healthcare grew by almost $46 million and represented 24% revenues. Retail manufacturing and logistics grew by over $29 million, and represented 15.6% revenues for the quarter. The remaining 14.6% of our revenues came primarily from other service oriented industries of communications, media, and new technology, which grew by over $22 million compared to Q2 of last year. For the quarter, application management represented 53% of revenues and application development was 47%. Both services continue to grow significantly in Q2. Application management grew 34% year-over-year and over 8% sequentially. Development grew 32% year-over-year and almost 5% sequentially. In sequential strength and application maintenance, we believe was driven by clients seeking to optimize efficiencies on non-discretionary spending due to budget concerns. During Q2 just over 78% of revenue clients in North America and for the first time Europe made up over 20% of total quarterly revenue at 20.3%. 1% and 1.5% of our revenue came from the Asian market. Our European business grew almost 15% sequentially and over 83% year-over-year for the quarter, as a result of our continued investment in that region. We had a gross addition of 63 new customers during the second quarter. We close the quarter with 520 active customers. During the quarter the number of accounts, which we consider to be strategic and have the potential to ramp up to at least $5 million to more than $50 million and annual revenue increased by five with the total number of strategic clients to 118. Turning to costs on a GAAP basis cost of revenues exclusive of depreciation and amortization increased about 30% for the quarter as compared to the second quarter of 2007. Second quarter cost of revenues included approximately $4.7 million of stock-based compensation expense, as well as $2.1 million of non-cash expenses related to the accounting for Indian fringe benefit tax expense recover from employees related to the exercise the stock options. As in such in our quarter the Indian fringe benefit expenses represent the timing impact of conversion of a portion of taxation in India from employees' stock option of employee stock option gains with a employee income tax to a company paid fringe benefit tax which has then recovered from the employee. We are treating this tax payment made by Cognizant as it operating expense and the equivalent we covered from the employee as the option exercise proceeds which are booked directly to equity. There is no cash impact to the company from this taxation. The increases in cost of revenues is primarily due to additional technical staff both onsite and offshore required to support our revenue growth. We increased our technical staff by more than 1,100 during the quarter and ended the quarter with approximately 55,500 technical staff. Second quarter SG&A, depreciation and amortization expenses were $184.9 million on a GAAP basis, up from $133.5 million in the second quarter of last year. GAAP, SG&A expense in Q2 included approximately $5.7 million of stock-based compensation expense and $3.8 million of non-cash expense related to the Indian fringe benefit taxes. GAAP operating income for the quarter increased 32% to $119.7 million, from $90.7 million in the second quarter of 2007. On a non-GAAP basis, which excludes the impact of $10.5 million of stock-based compensation expense and $5.9 million of non-cash fringe benefit tax expense; operating income for the second quarter was $136.1 million, up 35.8% from last year. Our GAAP operating margin was 17.5% for the quarter and our non-GAAP operating margin, which excludes stock-based compensation expense and stock-based non-cash Indian fringe benefit expense was 19.8% for the quarter, within our target range of 19% to 20%. The average rate for the Indian rupee was approximately 41.6 in the second quarter versus 39.7 in the first quarter of 2008. As Francisco mentioned we are committed to maintaining our investments in the business in order to generate growth and position our best for when the economy recovers. During Q2 we accelerated several of our investment programs mostly the hiring of client facing challenge and industry expertise. In addition to the benefit of the weaken rupee we partially funded this accelerated investments by implementing our annual salary increases in a phase manner. With increase as per significant portion of population our current of the end of Q2 rather than the beginning of Q2. Interest income for the first quarter was $4.9 million, compared to $6.5 million in the second quarter of 2007, and $6.2 million in the first quarter of this year. Sequential interest income decreased primarily due to a slight decline in the average, cash and investment balances as well as the meaningful decline in short term interest rates in the United States. We had a $500,000 foreign exchange loss during the quarter. Our GAAP tax rate for the second quarter was 16.3%, down slightly from 16.4% tax rate in Q1 2008. We expect the full year tax rate to be around 16.3%. As has been previously discussed, certain of our tax holidays are schedule to end in March 2009, the Indian government recently passed into law a one year extension of the STPI [ph] tax holiday accordingly scheduled to end March 2010. Our diluted share count for the quarter was $299.3 million up slightly from 299.1 in Q1 of 2008. Turning to the balance sheet, our balance sheet remains healthy we finished the quarter with just over $713 million of cash, short-term and long term investments up from 645 million at the end of March. During the second quarter operating activities generated approximately $75 million of cash. Financing activities generated approximately $39 million of cash from proceeds of options exercised and related tax benefits as well as our employees stock purchase program. In addition we spent approximately $32 million for capital expenditure during the quarter and approximately $12 million towards acquisitions primarily the purchase of strategic vision consulting. Based on our $583.1 million balance on June 30th, we finished the quarter with a DSO including unbilled receivables of 77 days compared to 71 days with the same period of 2007 and 73 days in the first quarter of 2008. During Q2 excluding unbilled receivables our DSO was approximately 70 days. The increase in DSO during the second quarter was primarily driven by new take customers a few large customers in our healthcare segment, as well as the general trend of larger customers paying bill a bit slower due to the economic. The quality of our receivables portfolio remains quite strong. Our unbilled receivable balance was approximately $57.7 million at the end of the second quarter, which was down 9 point... and was with down $9 million form March 31st. approximately 56% of our June 30th, unbilled balance was built in July. During the second quarter overall 25.7% of our revenue came from fixed price contracts, down from 26.8% in then first quarter of 2008 and up from 25.3 in the second quarter of last year. When we look at the mix budget solution type during the second quarter 31% of our development revenue and 21% of our maintenance revenue came from fixed price contracts during the quarter. Turning to headcount, at the end of the second quarter, our worldwide headcount including both technical professionals and support staff totaled approximately 59,300, of over 1,300 people from March 31 of this year, and that's almost 14,000 people from Q2 of 2007. Turn over including both voluntary and involuntary was approximately 15% annualized during the second quarter. Attrition was down approximately 17% in Q2 of last year. As you name the number, we hired a large number of new college graduates at the end of Q4 2007, which caused a decline in utilization levels in the first quarter of this year. As we absorbed these new college graduates into our practice during second quarter, our offshore utilization rates begin to improve increasing to approximately 55% from 53% in the first quarter. Offshore utilization excluding recent college graduates who are in our trainee program during the quarter was slightly over 70%. Onsite, utilization was approximately 88% during the quarter. At the end of Q2, we had approximately 7,000 unbilled people in our training programs. Throughout the remainder of 2008, we will be further increasing our utilization rates to take advantage of scale economies and to leverage our historically heavy over investment and bench resources and large number of trainees, we had onboard coming into the year. I would now like to comment on our growth expectations for the third quarter of 2008, as well as the full year. As Francisco has mentioned, we have adjusted our full year guidance to reflect the increased economic uncertainty, we have seen this summer. Our pipeline remains robust, and we continue to win significant projects, however this is muted by a tighter IT spending environment than we saw just three months ago. We continue to focus on working with our clients to leverage the advantages of our business level to help them through these challenging economic terms. Although we are disappointed that we must advise our full year guidance. We are pleased that our business continues to grow at a healthy pace despite today's economic term loans. The third quarter of 2008, we are projecting revenue of at least $723 million. This represents sequential growth of at least 5.5%. We have significant revenue visibility into our third quarter guidance due to the high level of recurring revenue and long-term nature of our customer relationships. In fact today, we have customer commitments for well over 90% of our third quarter revenue guidance. For the full year, we continue to expect industry leading revenue growth based on current conditions and client indications, we expect revenue of at least $2.81 billion. This has been typical in past year as we set the majority of our growth for the reminder of 2008 will come from the ramp of the clients that we won over the past months and years. During the reminder of 2008, we intend to continue to closely monitor our spending and assuming no material change in the value of that will be expect our operating margin to remain in the range of 19% to 20% before the impact of equity based compensation and non-cash fringe or other tax expense related stock option exercises. This is inline with our historic margin level goals. With its expected level of revenue growth and our expected operating margins, we are currently comfortable with our ability to deliver in Q3 GAAP EPS of $0.37 and non-GAAP EPS of $0.41, excluding estimated stock-based compensation and non-cash stock based since benefit tax expense of $0.04. This guidance includes the anticipation of our Q3 share count of approximately 300.3 million share, and tax rate of 16.3% and an operating margin within our target range of 19% to 20%, excluding stock-based compensation and fringe benefit tax. For the full year 2008 based on current business trends, we currently projected out EPS to be at least $1.44, and full year non-GAAP EPS to be at least $1.61excluding $0.17 of stock based compensations and fringe benefit tax expenses. This full year guidance includes the anticipation of share count of approximately 300 million shares. With that, we'd now like to open the call for questions. Operator? Question And Answer

[Operator Instructions]. Your first question comes from Ed Caso with Wachovia. Your line is open.

Hi, good afternoon. Your... changing of your adjectives from approximately to at least, is that just... that you are giving us the worst case scenario or close to the worst case scenario?

Well, we gave the guidance of approximately three months ago, that was based on... this is... our best guess where we are going to land. When we have changed the language to at least, we look at that as... we are achieving this level. So it is definitely the change... intentional change in language.

Okay. Can you quantify the impact of the IndyMac Bank and when that hit receivables like exposure?

We... obviously, had a first phase of ramp down last year. But we've still been doing a fair amount of work for them. The... we are fully reserved for any cash that's not collected in Q2, so we don't have any exposure coming to Q3 on the receivables at IndyMac.

Last question: are you extending start dates? Francisco D'Souza: Can you clarify that a little bit?

For the offers made a year ago for those that are coming on now or you pushed out start dates?

In terms of the callers recruit we made offers to a year ago, who started joining us in May of this year and will continue into 2009, clearly with a reduction in revenue guidance. We won't need as many people as we originally thought. We still intend to bring all those people on. There is no question about that. However the timing of that with some of the spread out over longer period of time, which is something you are seeing very common in the industry right now.

Thank you.

Your next question comes from Ashwin Shirvaikar with Citigroup. Your line is open.

Thanks. Just a question on the cost side. How should we think about the cost side of the equation with the new lower, growth rate and how does it effect? To some extend, you answered the on boarding. Does it effect people's compensation expectations and so on?

The biggest impact obviously is we won't hire as many people as we planned. Yes, we bought our guidance down, but we are still growing at a very, very healthy pace. So, we will continue to add people during the year, but selling not as many as we originally planned. So the biggest lever on the cost side is controlling the headcount growth.

Okay.But in terms of compensation expectations, people are expecting... what level of compensation increase now.

That's all done, the competition increases with CRO rolled out; that came in pretty much where we planned... and that's sort to 10% to 12% range offshore. But that's just because that's completely done.

Okay and could you give the number for... what was... what kind of pricing you are seeing, plus what was the CapEx goes to?

Sure. In terms of pricing, it's best way to phrase it, it's best way to phrase it, it's stable. We are actually seeing the competitors fee quite rationale on pricing. As there are bigger hot bias certainly not in this economy. But it's stable pricing environment. CapEx for the quarter was about $32 million. For the full year, given we are going slower... CapEx will probably come in below our original target of $250 million. How much below, we haven't fully worked that out. Obviously a lot of it's related to construction and yes, we stop underway obviously, we will finish up on schedule.

Okay, but you guys... any difference between banking versus financial service versus insurance? Francisco D'Souza: Clearly the biggest pressure were seen are in BFS part of it, to the banking and financial services as opposed to insurance, although we are... as we look to the rest of the year being more cautious and as we look... as we provided the revise guidance, we are also anticipating that some of the softness rolls over into insurance. And in fact into our other industry sectors as well. The other part of it was that when we talk with you last quarter, we hadn't yet stated to see the impacts of the economy, and so on financial services customers in Europe. And we are now starting to see some sign that they could be impacted of the economy and customers in the financial service sector and other sectors in Europe.

Okay, Thank you.

your next question comes from Rob Burgow [ph] with Bernstein. Your line is open.

Hi guys. I just wanted to clarify some of the assumptions in the guidance. And I guess the specific question is: is your guidance assuming the current macro conditions remain in plate. Are you assuming that there might be macro issues worsening in the second half. In other words, do you see risks that you could have to lower your guidance again if macro issues plans up again in the second half? Francisco D'Souza: Robert, what we are assuming now in the interest of caution is that macro conditions will worsen slightly over the course of the next rest of the year, not... we are not assuming that there going to be a major worsening, but we are not... we are expecting that things will deteriorate. As I said in my comments, what we saw in Q2 was the impact in healthcare. We are assuming over the cost of the rest of year, that we'll see the impact in our other industry sector as well. Another way to think about the way we framed our guidance, if you look on a quarterly basis over the next couple of quarters, what we try to be conservative in forecasting out for the rest of the year and the way we looked at it in addition to looking at our core operating metrics and pipelines and forecast and those kinds of measures that when look out over the next couple of quarters. The other thing we did was we said in general even through this period of economic turmoil, we tend to have pretty good visibility one quarter out. So we feel reasonably good about our Q3 guidance. The... at least 723 million for Q3 that we mentioned. In Q4, we've taken an appropriately conservative view in our mind as we think about the potential of deterioration in the macro environment. And so our implied revenue growth for Q4 is quite modest. One way to think about it is that in each of the last nine quarters so for more than two years, we have added more revenue in each of those quarters than our guidance implies relied in the fourth quarter. Francisco D'Souza: And the reason we did that is... our belief is the economy is going to stay tough for the rest of the year. And we want to be prudent in our expectation.

I got it. And then when you look at the guidance from another angle. Can you state an upper end to your revenue growth prospects for the year. Alternatively stated is the 35% revenue growth range, still a possibility for 2008, given that you seem to be adding some buffer for a weakening economy? Francisco D'Souza: We have not put a upper end. But obviously it is the challenging economy out there as you read the on the papers everyday. So we think we've been prudent in assuming this new guidance.

Alright. And then in terms of the margins it looks like reinvesting all of the ruby based margin of site back in the business. Is that case? Or you seeing that ruby base margin of site being offset by certain margin pressures? What's happening on that front? Francisco D'Souza: The I said the for Q2 we invested back into business. Now remember the average rate for Q2 is less than the current spot rates. So there is some more ruby benefit in Q3 assuming that ruby will be hold. But as I mentioned in my prepared comments, we did move a significant portion of the south the kind of salary increases to the end of the quarter. So that leads us to Q3 and way that is funded is by the assuming the ruby stays where it is utilization go up materially in Q3. So what we have some thing what we meant to significantly take up utilization. And yes if you look at the sequential on crisis SG&A spend it is very significant Q2 and it will have the significant Q3. So we saw the accelerated a bunch of SG&A client bases investment and also we wont that same sort of bump in Q3.

Right. I guess I am try to ask or obtain here is there anything worrisome on the margin front that you are using the ruby to offset.

No that's the on a margin side most information being going in our favor. So there is nothing I think significantly that's been going down.

Okay. So another one just a rupee word sort of appreciate some here you wouldn't need to take down your margin range or your EPS guidance you'll have ability sort of a jump to that?

We have a lot levels in our expense base so lets go with a drastic movement will be I am not particularly concern about achieve our margin targets.

Alright. Thanks guys.

Your next question comes from Karl Keirstead from Kaufman Brothers. Your line is open.

Hi, good afternoon. I have got two questions one is, if you look at your guidance your fourth quarter revenue assumption would about $760 million if I would see after that the growth will kind of normalized 5-6% on a sequentially basis, I get to an '09 growth rate of about 23%, 25% is that a good working assumption from here?

Hey Karl, it is just way to early to know. Yes, a lot of it depends on what's happening with the economy and as customers go through some difficult financial transitions do they... how could we, do they leverage offshore to adjusted in their cost structure. So it's... we haven't even begun with discussions clients the 2009 yet. The good news is, penetration levels is still very low for offshore, and we provide part of the solution on long term basis, some clients suggesting to potentially new economic model. But at this point, we'll more focused on our 2008, and making the investments some 2009 and beyond. We continue job industry leading growth.

Fair enough. And then a second question here, it seems you are talking little bit more on the prepared remarks about investing and enhancing your demand and consulting expertise and extending our offering into BPO and KPO and ITO for that matter. Can you talk a little bit about what's happening in the client base set might be incensing you to adjust the business model, if you would like to perhaps you want to change six months ago, so it sounds like perhaps you are something to other than the sickle downturn which everybody is seeing. Perhaps you could offer some thoughts. Francisco D'Souza: Yes. I think that a... Karl first of all I would say that, these all of these investment that we have refer to under that of worker my prepared comment are not new. We have been systematically building out industry domain expertise for years now in each of the industry that we serve and we have updated all of you periodically on a refer to that with the acquisition like SEC and market our extend like scientist a few quarters a go. So we are continue to do that we thing that is very important as you look forward to not just be able to provide our clients with good technology solutions with that be able to report an industry lands on top of that so that we provide solution to clients business problems and we can be more business relevant. We seem to be strategically relevant when we have our dialogs with customers. So in terms of industry domain expertise that been going for years now and it some thing that we will continue to do in systematically build out across each of the industry that we serve in terms of BPO and IT infrastructure services again this are service line that we have been talking about for several quarters now. We think that they both represent in there own right strong revenue opportunity particularly the vertical business process outsourcing that we talk about present time and ITO which is significantly under penetrate from on offering perspective. The reason that we are highlight those on the call today first because they starting to see some attraction with infrastructure services for example now approaching 5% of our revenues but also because we are starting to see clients really looking to looking beyond the traditional application based to this are there area and in the top economic environment to say how can I spend my use of off shoring and this are two logical BPO and KPO and IT infrastructure services are logical place when they turn in.

Okay, great. Thank you for taking my questions. Francisco D'Souza: Thanks Karl.

Your next question comes from Moshe Katri from Cowen. Your line is open.

Thanks, if you look at the June quarter and monthly basis what the trends similar to see in March started strong ended to the weaker and then so far during the month of July, did you see further deterioration in demand and fundamentals?

No, it's a different situation in Q1. In Q1 March was very bad, in Q2 this was June was not very good but we are counting on was... coming getting slower momentum to coming out from Q2 going into Q3 and so more steady quarter. So different dynamics than Q1 were you know things would fell off not in March. But we clearly did not have momentum that we are hoping for, coming out of Q2.

And is that extent into to the month of July as well?

We haven't closed that specially after July

Okay. And than you are talking about a but very difficult environment you seen any significantly delays and projects starts or anything in terms of meaningful project cancellations Francisco D'Souza: I pointed out couple of situations Moshe, during my prepaid comment. I think in Q2 we saw life sciences customers in particular, pausing and re assessing putting some of there plans on hold and then specifically for the rest of the year one of our payer customers a large customer has inform there is plan to cut bank spending quite significantly over then, over the third and fourth quarters. So we are seeing some delayed and we are seeing some kind.

Okay. Is there any quantify those, with sort of impact form that customer will have on the second half in terms of revenues and then just to be clear, based on management's bonus compensation structure, I think the magic number is about 35% revenue growth and I think below that, I think the management will not get paid in bonus or bonuses record?

That's correct in the long-term competition not on the annual bonds level long-term that is going.

Okay and can you also quantify the impact from that pair on second half revenues? Thanks. Francisco D'Souza: It's built into the guidance.

it's built into our guidance. It is not always to talk about different clients.

Alright thanks.

Your next question comes from Julio Quinteros from Goldman Sachs. Your line is open.

Thanks, want to go back to one specific area, you guys can talk a little bit about trends in ERP spending especially coming out of the SAP quarter over the last couple of days. I am just trying to get a sense for how those things tied together. Because it sounds like your commentary around ERP still sounds like, it's a relatively robust and maybe if you could just put any numbers around, what that growth rate looks like, that would be helpful.

We had a good quarter with ERP, our... just looking at the numbers here. Both the SAP and the Oracle businesses grew nicely just to give you some context. Both of them grew sequentially better than 20%, and on a year-over-year basis, both of them grew most of 50%. So, we continue to see strong growth in both of those, it's being helped a little bit by our key system relationship, some SAP work there as well. And we have a strong, most of our customers have a strong installed of SAP and Oracle, so we'll continue to do work for them. And it's I would say that our progress there has been strong and we are very pleased sequential growth in both of the market.

One of the things to remember is a lot of the work we do is maintenance enhancements, rollouts, so this is not a way to direct correlation between new license sales and our revenue and ERP, because a lot of it is related to the installed base, and some moving our work to support that installed based offshore.

Got it. And what are your advice assumption now having had two systems under wings a little bit. What are you guys thinking about there in terms of revenue run rate or contribution from these systems going forward?

Real key is the new deals, we are joining like going after. And we are starting to go after some meaningful deals. But as you know larger deals in Europe take on. So, when I think about key systems being a growth driver as I said, when we did the deal and on the first quarter earnings call, we should not expect it to be a growth drive in the second half of this year. Where we're thinking, because again it's kicking as next year things go the way we go.

Okay, great. And then finally, I guess just in terms of sort of this proverbial question about how we know that this is really the bottom and guidance, I guess more to you Gordon, given that this all kind of fault in your lab [ph] here, where are we at in terms of what really needs to be done to actually hit the number for the fourth quarter, more than anything else, I guess it's the full year number, 2.8 billion at this point. Can you just give us a sense in terms of do you actually have to win these stuff to get to those numbers, the ones that you are projecting here, or is there some other way of thinking about what it takes to really hit this from here.

You areasking the right question, Julio. In Q3, we are roll up into it and this is not a business we wait to loss that quarters on a contract. So Q3, we kind of understand where we are going to land. Q4, because of all the uncertainty out there to kind of calculate our guidance, you'll see Q3 we're guiding to 5.5% of growth, 5.5% sequential growth. In Q4, we put some cushion in there and we guided to look the less... about 5% sequential growth, because there is a little bit more of an unknown. So, we think we have sufficient impression in there, just when where the part you care about is that a lost X percent of revenue. There is a core part is ongoing, but it is on short time. But we built that into our model.

And just looking maybe back as you guys looking at your business now and sort of compare where we were at the beginning of the year and where we are now. I mean typically, I think we had assumed that maybe half of the business was really discretionary, because it was abs... versus abs maintenance or something along those lines? Is there just some sense in terms of what can really turned off and what needs to run of course maybe some percentages around what ultimately is discretionary in your model?

The issues... that's what could be turned off, because... yes, we have a couple of accounts, where steps went down a little bit. But the bigger issue is the growth and how quickly are people moving new projects offshore, and that can impact both maintenance and development.

Right.

Now obviously you saw it in the sequential growth numbers that maintenance grew a little faster than development, which makes sense at a touch economy. But the uncertain economy can impact the growth of maintenance, yes absolutely. And that's an assumptions that it will is baked into our guidance.

Got it, okay. And then can you just give us those final metrics on the offshore onside effort mix and just kind of a standard ones that we usually at?

Sure, just hold on a second. We went very slightly on sites compared to last quarter, but almost unchanged. Pricing on a year-over-year basis is up 1.5% to 2%. Utilization is 88%, onsite 55%, offshore on, so no surprises in the metrics, when I look the metrics for Q2 in my mind the only one I was disappointed in was surprise by was DSO that sound to be higher than one and we understand why but I mean out your credit risk but on that metrics pretty much attractive or reflected.

Great. Thanks.

Your next question comes from James Friedman from Susquehanna. Your line is open.

Hi, thanks. It's Jamie Friedman at Susquehanna. I wanted to ask first about the balance sheet question Gordon. When I look at the unbilled revenue as a percentage of the revenue that actually decline to which I see to help each trend, but I am trying to reconcile that with the DSO and receivablesas a percentage of the revenue, how should we think about those two dynamics?

Unbilled has bounce round. We had a good as we saw jump in Q1 and it came back down a little bit in a Q2, I think about that a little bit different, DSO number we report includes unbilled and it went up is driven by UK healthcare customers and just generally customers panel a bit slower, due to the economy, So what we did not see is also very small customers stretch all payments. What we every seen slower payment of that is the large customers, which obviously means it's not a credit concern it's more just we got a get tougher on that. Unbilled receivables bounce around here we continue to bill 56% of it gets billed in July so we will up or down next quarter was about allow that and some you can get the contracts.

Okay. And I also want to ask you about the operating margin. I think you know the company is well known for its march of governing the operating margin in certain level, and reinvesting in the top line, but the gross margin for actually quite healthy in the quarter, I guess is there any update here thinking at this juncture in the life cycle of the company. Is there any opportunity to release the operating margins higher being at the growth as decelerated?

No, you should have no expectations of that. The gross margin was up because we made a decision on the... to phase the timing of the salary increases, and to invest very heavily down on quite basing into demand expertise. So our SG&A spend went up significantly, sequentially while our gross margin went up due to the rupee and improvement in utilization, what you are seeing in Q3, because that has been impacted the salary increases, you will see gross margin come down a little bit, but operating margin remain healthy. Francisco D'Souza: You know, Just to add to that Jamie, we are playing for the long term here and that show some significant opportunities to invest in capital share market. We talked a little bit things like IT infrastructure services and so far and so forth these are very under penetrated service offerings there are still considerable opportunity for us to invest. We are talking beyond the Europe there are other geographies in the world where we have investment priorities. So there are still significant growth opportunities and significant investment opportunities for us as we look forward.

Thank you.

Great. And with that it's a little bit it is 6 o'clock people probably want to get home for dinner, so thanks. Francisco D'Souza: Yes, thanks and thanks everyone for joining us on the call today. To conclude, we are pleased with our financial and operating performance in the second quarter across the company, it's exceeded our guidance and improved our ability to maintain industry leading growth despite the continuing the current economic climate. We are adopting a more cautious stance for the remainder of the year. But, we remain optimistic about our ability to best position this business for future growth to continue to outpace the industry average.