Greg Klaben - VP of IR Ken Kannappan - President and CEO Barbara Scherer - SVP Finance & Administration and CFO

Reik Read - Robert Baird & Company Paul Coster - JPMorgan Tavis McCourt - Morgan Keegan Rohit Chopra - Wedbush Morgan Securities Manuel Recarey - Kaufman Brothers John Bright - Avondale Partners

Good evening, I would like to welcome everyone to the Q3 2009 Financial Results Conference Call. (Operator Instructions). Thank you. Mr. Klaben, you may begin your conference.

Thank you, Kara. Joining me today to discuss our third quarter fiscal 2009 financial results are Ken Kannappan, Plantronics' President and CEO and Barbara Scherer, Senior Vice President of Finance and Administration and CFO. I would like to remind you that during the course of today’s conference call we may make certain forward-looking statements that are subject to risks and uncertainties as outlined in today’s press release. As we’ve highlighted before, the risk factors in our press release and SEC filings are not standard boilerplate. We update these risks every quarter, adding and dropping language and changing the order depending upon the timing and potential impact of the concerns that we foresee. We believe forecasting results of operations is unusually difficult and we ask you to focus particular attention on the risk factors that could cause actual results to differ materially from those anticipated by any such statements. For further information, please refer to the company’s Forms 10-K, 10-Q, today’s press release and other SEC filings. Plantronics third quarter fiscal 2009 net revenues were $182.8 million compared with $232.8 million in the third quarter of fiscal 2008. Plantronics GAAP diluted loss per share was $1.90 in the third quarter of fiscal 2009 compared with earnings per share of $0.39 in the same quarter of the prior year. Non-GAAP diluted earnings per share for the third quarter were $0.08 compared with $0.53 in the third quarter of fiscal 2008. Difference between GAAP and non-GAAP earnings per share for the third quarter includes goodwill and long-lived asset impairment charges, purchased accounting amortization, restructuring and other related costs. The cost of stock-based compensation, the release of tax reserves due to expiration of certain statutes of limitation. I would like to remind you that on our investor relations section of our website, we have an updated PowerPoint presentation, as well as an analyst metric sheet with all the financials and metrics released today. Now I'll turn the call over to Ken.

Thank you Greg. And thanks to all of you for taking the time to listen to our call. Before reviewing the highlights of the third quarter and our outlook, I want to summarize our key objectives. To be profitable and cash flow positive during this economic downturn. While we may be surprised in the very short-term with the volatility of market demand, we intend to respond quickly to align our cost structures; supply chain to our actual business. Flexibility is crucial when visibility is poor. In this environment, every business needs to pull its own weight and we must improve the profitability of our consumer businesses. Second, we're looking to position Plantronics to win as Unified Communications adoption takes off. We see this as a huge opportunity in which market share will be [going] to be determined over the course of the next year, even if most of the revenues will be realized subsequently. Turning to the key takeaways of our third quarter. Revenue declined by 21%, as economic weakness continued to cross product lines and geographies. However, our Bluetooth product segment was hit particularly hard especially on a sequential basis, resulting in a 41% decline and a 22% decline from the prior year. Our earnings were below expectations, but we remain profitable before non-cash charges and cash flow positive from operations. Our Office and Contact Center business came at the low-end of expectations, and we reduced our inventory by over $25 million or approximately 16% despite a substantial change in revenue expectations. The company has undertaken restructuring activities to reduce fixed and variable expenses with the objective of maintaining our profitability and positive cash flow generation through this economic cycle. We expect the cost savings from these activities will exceed $50 million during fiscal 2010, as compared to the Q2 annualized run rate. Our consumer businesses are being significantly impacted by the weak retail environment and the profitability in these businesses needs to be improved. We believe part of the weakness in Bluetooth is attributable to inventory reduction activities of some competitors. In addition, total category demand contracted, we have to look at our profitability based on a lower revenue model. Improving Bluetooth profitability is the major objective and we're evaluating ways we can substantially increase our margins. Though the Audio Entertainment Group met the low end of our revenue expectations, it did not meet target product margins. The Audio Entertainment Group’s profitability was impacted by a number of items, which Barbara will cover. On the positive side, our retail placements are expected to be up over 20% from Q3 to Q4, and over 30% from Q4 to Q1. Although, we remain confident that our Altec business did not deteriorate in global economy, it would be profitable in fiscal 2010. In this environment there is risk, it could be delayed. This has been a concern of many shareholders and we remain committed to the long-term shareholder value. We are evaluating alternatives to improve the profitability of our consumer businesses and I expect to update you on this topic within the next couple of months. One bright spot we see is the opportunity presented by Unified Communications. While technically, UC is about converging networks, for business it is about improving workforce collaboration, regardless of where and when. In many, UC environments, the PC will be the predominant tool for communication, voice data and otherwise. This offers the convenience of Unified messaging to check and listen to voice mails and e-mails in one box, tools to conduct multiple IM sessions, which at the click of mouse can be combined in a group collaboration or escalated voice. The ability to host or manage conference calls with shared desktop applications saving third party service charges, and rich applications such as present can be added, which allows one to know whether someone is available before calling them -- to route communications as the most efficient channel. We continue to believe that the implementation of UC telephony via the SoftPhone, will be the most significant long-term driver of office headset adoption. As a result, the key long-term driver of revenue and profit growth for Plantronics. Despite weak economic conditions, prior deployment of UC solutions and headsets continued to grow among blue chip companies, with some evidence of the cost savings and productivity enhancements derived from UC are driving the expansion of existing deployments in both the US and Europe. We expect that the current environment will delay widespread implementations, with virtually all communication infrastructure players committed to UC, we believe that most IT organizations have embraced UC in their long-term planning. Our headsets play a critical role in the successful deployment of UC, as the PC has no effective audio I/O. The built-in microphone and speaker are not private in an open plan office in the notebook for an office environment and don't offer good audio quality. This forces a choice of purchasing a headset like a USB and handset for the PC or using an IP phone for voice calls. Clearly, the second and third options do provide the benefits, familiarity in a hand set and key pad. But the headset is more portable, hygienic, ergonomic and a practical solution for mobile usage. Furthermore, the headset allows someone to listen to streaming media for training and other growing received applications where holding a handset to listen would be absurd. Our outlook for the March quarters is for revenue decline. At the low end of our guidance range we're approximately 40% from last year and approximately 30% sequentially. In addition to the overall economic volatility, this quarter is always difficult for us seasonally. We usually experience a slow January and rising sales during March. We approach this guidance; what we hope is an appropriate amount of conservatism and did not factor in the seasonal upturn in March that we normally experience. The revenue decline is expected to be most dear in the Bluetooth Headset segment with declines of over 50% forecast from last year; inventory and liquidation sales aside. We continue to believe that we have a very competitive product offering and have gained re-sale market share.; the principal fundamental factors slowdown in consumer Bluetooth spending. In Office and Contact Center, we anticipate a year-to-year decline or perhaps 35% to 40%, with wireless products experiencing the greater decline. In difficult economic times, voluntary turnover declines amongst the businesses and financial professionals who are the greatest adopters of our wireless products. This dramatically reduces replacement sales. In addition, heightened budget scrutiny is extending cost controls all the way to headset purchases. In the Audio Entertainment Group margins are seasonally down a quarter from December. We expect that to occur and given the tough economic environment, we also anticipate a decline of approximately 20% versus Q4 last year. Our guidance for an operating loss calls in a question, will our projected cost reduction will be sufficient to assure profitability through the economic downturn? While we won't see the full benefit of our cost reduction until the June quarter, we are committed to monitoring our cost structure to make further adjustments to match the economic environment with the goal of being profitable and cash flow positive in the downturn. We will continue to focus on delivering exceptional products for exceptional value. We have a very strong pipeline of products in each of our businesses. At CES we received very favorable buyer reaction to Bluetooth headsets and Altec Lansing products which now have been announced. With that I'd like to the turn the call over to Barbara to review our results in more detail.

Thanks Ken. In comparison to the low end of our Q3 guidance provided on October 22, revenues actually held up fairly well with a notable exception of Bluetooth. Bluetooth in a very weak consumer spending environment resulted in the worst overall holiday season in four decades with consumer electronics no exception. In that environment, retailers and carriers cut back substantially on what had been their plan and competitors discounted heavily in an effort to move through inventories. The combination of these factors resulted in an approximately $22 million of the revenue miss in the low end of our guidance range or essentially all of the mix. Our gross profit margins were effected not only by the mix Bluetooth revenue, but also heavily by much lower utilization of our factories, as we worked successfully to lower inventories across all product lines. There are other factors that caused gross margin to decline which were specific to either ACG or AEG and I will cover those in a few minutes. We were able to reduce our operating expenses, approximately $4 million sequentially, despite the fact that our reduction enforced and many of the other actions we have taken stays in over the course of the March quarter, unless we won't have the full benefit of those reductions until Q1 of FY 2010. Relative to the preliminary results we announced on January 14, our non-GAAP results came in at $0.08, lower than the $0.11 to $0.12 we had estimated, largely due to subsequent events that need to be included in the Q3 results. The single biggest item was $1.2 million of bad debt expense against accounts receivables, due to a large European distributor filing for receivership after quarter end. While painful, I think this is also evident how volatile business conditions are and how difficult it is to forecast the results of operations and provide guidance. All that being said, we are providing guidance for Q4, and I will spend time on that after going through the results for Q3. Turning to the Audio Communications Group, revenues of $152.6 million were down approximately 22% from $43.3 million compared to the third quarter of last year. The decline was driven by decreased sales in all of our major product categories with the exception of clarity which increased 12%. OCC net revenues decreased $29.3 million or 22%; was $15.3 million and the decline coming from office wireless systems and $14.1 million related to professional grade coded products. Revenue related to our Bluetooth headsets decreased 22% or $9.2 million. Geographically, ACG's decline in net revenues compared to Q3 last year were down 22.6% domestically and down 21.3% internationally, resulting in a 60-40 domestic to international mix, which is consistent with Q3 FY'08 60-40; an evidence of the breadth of macroeconomic weakness affecting our business. ACG's non-GAAP gross margin was 40.1% compared to 46.2% in the December quarter last year due to substantially lower factory utilization and higher warranty costs. The higher warranty costs were primarily related to our Bluetooth products. We believe the increase in warranty costs is most likely the result of changes in consumer and retail behavior due to the economic environment and all the new Bluetooth headset users in the market since the Californian Washington hands free laws went into effect last summer. It is not a function of quality issues of our products. We continue to receive feedback to return rates, to retail of our products that are lower than those of competitors. ACG had a non-GAAP operating margin of 5.9% in Q3. The decrease in our operating margin was primarily due to lower gross profit on lower revenues. As we announced on January 14, given the weak economic environment, we are undertaking a series of actions to lower our cost structure and improve efficiencies. These actions included a restructuring plan to reduce our worldwide workforce, primarily in ACG by approximately 18% in comparison with September 30, 2008 and other cost cutting measures, including management salary deductions and decreases in other operating expenses. While we have not yet felt the full effect of all these actions our non-GAAP operating expenses decreased more than 6% sequentially, despite the $1.2 million increase in expense for bad debt. Now I'm going to turn to the Audio Entertainment Group summary. Net revenues of $30.2 million were in line with the low-end of our expectation for the quarter and represented an $8.7 million sequential increase and a $6.6 million year-over-year decrease. AEG non-GAAP gross margin was 3.6% compared to 13.5% in the December quarter last year. Due to higher requirements for inventory provisions and maker's claims compared to Q3 last year, foreign exchange and a less favorable overall composition of revenue. Relative to our internal estimates for the current quarter and our related October guidance, the principal factors, which cause gross margins to be off; we're reworking expediting cost on our new product and the unfavorable impact of foreign exchange. The AEG GAAP results include a $117.5 million impairment charge recorded during the current quarter related to goodwill and long-lived assets. Subsequent to the impairment $3.7 million of intangible assets subject to amortization remain on the books, which will result in quarterly amortization of approximately $0.3 million through fiscal 2012 in comparison with the prior run rate of $1.5 million. Our AEG team has worked hard to reduce the division's cost structure, which can be seen by the decrease in the non-GAAP operating expenses by approximately 29% in a year-ago quarter and 9% sequentially. Despite these efforts as well as the strong placements and mostly inline revenue performance, the quarterly year-over-year non-GAAP operating loss increased, $1.5 million driven by our decline in revenue and gross profit. On a consolidated basis, below the operating income line, we had $1.5 million in other expenses compared to other income of $2.2 million in the year ago quarter. Virtually all this swing came from foreign exchange where we had a gain of $0.4 million in Q3 of last year compared to a loss of $1.9 million in Q3 this year. These losses are the result of the increase in the US dollar relative to the foreign currencies where we have net balance sheet exposures; principally the Euro and British pound. We do hedge a portion of the estimated euro and have net asset exposure as a result, we had a $3 million hedge gain, which partially off set the $4.9 million loss on the unhedged net assets. Our consolidated effective non-GAAP tax rate for the quarter was negative 50%, resulting in a tax benefit on a non-GAAP basis, compared to 23.8% in a year ago quarter. The decrease in the non-GAAP rate was due to the extension of the research credit, the lower profit before tax in Q3, and a reduction in the projected annual tax rate as a result of these factors and our lower outlook for Q4. The third quarter non-GAAP tax rate was lower than our guidance at 25.5% for these same reasons. On a GAAP basis, our Q3 tax benefit primarily relates to the tax benefit on the impairment charge and a release of $2.1 million of tax reserves, due to the escalation ]of statute of limitation. On the balance sheet, our $183.4 million in cash, cash equivalent and short-term investments are all on treasury to bank deposits. And our accounts receivable collection remains relatively strong. Due to our concentrated efforts to reduce inventory, inventories were down $25.9 million sequentially and turns increased from 3 to 3.5. The 3.5 compares to turns of 4.2 in the same quarter last year. To achieve this level of reduction, we substantially curtailed purchases of material from our suppliers, and that's our accounts payable, it also declined sharply and in fact declined more than the decline in inventory. However, we still managed to generate positive cash flow from operations of approximately $5 million. We expect to reduce inventory by a further $10 million to $12 million in Q4. Capital spending was $6.3 million lower than depreciation and amortization of $6.6 million in the quarter and was in line with our expectations. We currently expect CapEx to be less than $4 million in Q4, bringing our full year estimate to something under $25 million. And relative to the approximate $25 million CapEx estimate this year, we anticipate CapEx of $12 million to $13 million in fiscal 2010. Our outlook for the fourth quarter is down considerably compared to the year ago quarter, due to what we estimate are the risks of further slowdown based on the global economic slowdown. Our estimates are also based on the actual order rates so far in the quarter. Specifically, we believe that each of our major product lines will be down compared to Q4 last year and down from the holiday Q3 season. And the total consolidated net revenues will be in the range of $125 million to $135 million. The pace of job losses in the US is expected to increase in the March quarter from the December quarter and we expect that will lead to or has already led to an ever weaker consumer spending environment. And there's also evidence of continued cost cutting in the business sector. This macro environment has a strong negative impact on demand for our products. In normal times, we experience a trend of rising demand over the course of the March quarter. As these are anything but normal times, we think it is likely that the level of demand we have experienced thus far this quarter could be the ongoing level for the entire quarter; i.e. no pickup or the demand could even lessen given the deteriorating macro environment. Net revenues in our consumer businesses normally do decline from December to the March quarter, but we believe the decline this year will be larger than normal and will result in sales levels below that of the year-ago quarter. Our consumer businesses face the challenges of competitors with still large inventories due to the industry-wide weak holiday season. We are therefore concerned and cautious about the level of sales we can achieve in a quarter within the context of very weak consumer spending and the level of competition for a given dollar of consumer spending so high. Gross margin should be approximately the same percentage as Q3. Despite the decrease in volume, the combination of cost reductions and what we believe should be no significant unusual cost in AEG in Q4 is expected to result in overall consolidated gross profit margins relatively consistent with those in Q3. We do expect operating expenses to decrease sequentially, based on the cost reduction actions we have taken, but not to reach quite the full level we plan for this fiscal 2010. Therefore, the non-GAAP operating loss, we expect $4 million to $10 million, as a function of the lower gross profit due to lower revenue partially offset by an anticipated reduction of $4 million to $5 million in operating expenses. In this challenging environment we also understand the risks of bad debt expense, that inventory could decline in value below cost and sales returns and warranty returns could be higher than they have been in the past. Each of those factors could be materially different and could affect our forecasted results of operations and cause our actual results to be different from our current estimates. On a GAAP basis we will also have $6.7 million to $7.2 million in restructuring charges, primarily for termination benefits related to the reduction of force; $0.6 million in purchase accounting amortization and 3.8 million in equity compensation expense for total GAAP charges of $11.1 to $11.6 million pre-tax. While these charges are all relatively certain, there are other charges we may find it necessary to take, as we work through and decide on the best course of action work for improving profitability in our consumer businesses. As we are exploring several alternatives and have not reached a decision, such additional charges are not estimated with reasonable certainty at this time. And with that I'm going to turn it back over to Kara, the conference facilitator for the Q&A session.

(Operator Instructions). Your first question will come from the line of Reik Read with Robert Baird & Company. Reik Read - Robert Baird & Company: Hi, good afternoon. How are you guys?

Good, thanks. How are you? Reik Read - Robert Baird & Company: Good, thanks. Could you guys just comment a little bit on the restructuring that you're taking? How much capacity do you think will be taken out? And is that over the course of the next quarters or does it go beyond that?

It just not clear. When you say capacity, you are referring to production capacity? Reik Read - Robert Baird & Company: Exactly.

It won't really affect production capacity. Yes, we will have reduced headcount that effects production, but those are things that we can take up fairly quickly. So the actual amount of tooling and test equipment that we have in place won't in fact be reduced. Reik Read - Robert Baird & Company: Okay. So when you guys refer to fixed costs reduction, can you give us a sense for what you are zeroing in on?

Let me put it this way, Reik. Of the $50 million, over $50 million; about $40 million of that is in operating expenses and $10 million is in cost of goods sold. And of the amount in cost of goods sold, a fair chunk of that is direct labor. There are other things, other cost reductions, freight and other items in there. But it is true that you can generally rehire and train up DL if we're so lucky as to experience an increase in demand, I needed to do that. Reik Read - Robert Baird & Company: Okay. I guess what I hear you say is that there is still a good chunk of this that is variable and if you kind of assume at least in the course of the next couple of quarters, a difficult pricing environment and volumes that are challenging. It really won't become evident until things start to bottom out. You really won't see that from a bottom line perspective. Is that a fair way to look at it?

Reik, I wasn't 100% sure I understood. You said a lot of this is still variable meaning of our cost structure that we have going forward. Reik Read - Robert Baird & Company: Correct. I am just wondering as things weaken up further. It just seems like you are trying to stay even. And I am just wondering, that it may be the better way to ask it is, at what revenue level would you actually start to see some level of improvement as a result of the actions you're taking?

At any given revenue level, we're way better off with these cost reductions than we would have been if we hadn't done that. I mean we're $50 million better off at any particular revenue level. And increases in the B2B business wouldn't require much increase in the headcount; a lot of the headcount reductions came out of the factory in China, which are related to Bluetooth, which was what was off so much. So I think small increases in revenue on the B2B side would make a meaningful difference to the bottom-line. Reik Read - Robert Baird & Company: Okay. And then just one follow-up question on the Unified Communication. Ken, you provided some pretty good examples of what you're talking about. Is there anyway that -- and you talked in your press release of a number of trials that are going on. Can you give us some sense or an example of the value as these trials unfold? What's the value that these guys are seeing? What's the stage of the trial and when would we start or when would you expect to see little bit more ramp out of that process?

Okay. So I'll try to answer that. First, I think that different organizations are looking for different things. There are some organizations that are in a position to monetize hard cost from real estates, but it is a minority because very often you got a fixed lease expense or something else that you're not actually able, for whatever reasons, to monetize a reduction in the utilization of office space. However, there are some organizations that are in a position to do that and for those organization, this is a very significant potential cost reduction opportunity and they will be sooner. There are some organizations that are looking to more effectively collaborate and see this as a productivity exercise which is very, very hard for them to effectively quantify that they believe in the benefits and so you know, that they are committed to moving forward. Almost all organizations will see what I called incidental cost savings, i.e. conferencing and some other costs. Those of course could go to SoftPhones that whatever reasons have a side expansion can save some money on the hard phones. So, there is a variety of those. I think that most organizations right now are in a pilot phase. They see this as something that’s inevitable that they are going to need to do. They want to understand the capabilities further, they want to understand how they are going to implement it. Some of them are waiting for next gen releases of software before they intend to rollout. Some of them certainly are very concerned with budgets and environments, and trying to time that relative to both maturity of the technology, their ability to deploy it and the economic cycle. So in short, I do believe that there will be some rollouts this year. But not you know -- let's just call it early adopters type of thing, and the more substantive insignificant revenues I think will occur in 2010 and particularly out into 2011. Reik Read - Robert Baird & Company: Okay, great, thank you.

Your next question will come from the line Paul Coster with JPMorgan. Paul Coster - JPMorgan: Ken, on that last point. Are there any companies that are adopting Unified Communication aggressively that you can name just as case study, so that we can sort of take a look at how they are doing it or is Plantronics for instance an early adopter?

So, the short answer is yes. There are companies that are rolling out UC again – not many. The issue in terms of naming them is no. We have not received any approvals to name names and therefore are not in a position to do – at least not at this point in time. Yes, Plantronics has implemented UC. We felt we needed to do it independent, frankly, of all of the potential benefits, because this is such a critical market for us that we want to understand it and you understand more when you also use it. Paul Coster - JPMorgan: Okay. So, its is a little optimistic amongst us who are looking for a sort of pent up refresh cycle. Can you give us your sense of how long your typical Bluetooth product lasts, battery, et cetera. Both in the consumer and in the enterprise OCC segments?

Well, first the average product replacement cycle forces much faster in consumer – we believe it’s somewhere in the nine month timeframe. But having said that, nothing actually requires somebody to replace it that frequently. People can certainly elongate the time until they replace it. Our products are typically going to be compatible with nexgen Bluetooth profile and so there is really nothing that prevents that. Yes, there is some battery attenuation overtime, but I have to tell you honestly that most people do not need anywhere near the amount of battery capacity that we put into these products. So we have not tested this in a real recession to find out how in a tough recessionary environment, people who really want to use these products will actually behave. We certainly expect that it will elongate and of course these people are elongate in the replacement cycle for handsets that just directly impacts when they're in the store, able to see a new model, able to be treated to a soft bundle or hard bundle or anything else that might tend to precipitate them upgrading on their Bluetooth headset. With respect to the office market, historically we’d seen a tighter replacement cycle, particularly for the higher-end wireless office types of product, where I would have said, broadly speaking it is in the two to five centered in three to four year timeframe on the office side. You don't have to replace the product. You can replace the battery and after depending upon the individual in that two to three year, more likely three-year timeframe you would expect at a minimum battery replacement. But again in a really tough economic environment people can absolutely replace and they don't have to [own] the battery. They don't have to replace the whole product. We do think we're coming out with some pretty compelling offerings that will make it more inviting, but if somebody is really watching their money, they can just do the battery only. Paul Coster - JPMorgan: Okay, and my last question is, clearly these are very painful cutbacks, much of the pain is sort of manifest internally. Externally, will it mean a reduced product line-up, reduced sort of visible marketing, a slower rates of product innovation. Can you just sort of focus through what the trade-offs are there?

Sure. Well, as this probably has been clear throughout all of my comments. We are still maintaining our investments, in my mind, fully, with respect to unified communications. We see a huge opportunity there, and so while it is true that we're cutting our overall investments, we're still able to pick that as a priority and fully fund the things that we need to do, which we think it is the most critical and significant area of innovation that we need to focus on. Let me just kind of start by making that clear, and I think that’s really important. In fact, we already had a pretty rich pipeline underway across the board in our business. And so, actually I still think we have a very rich suite of products, which will be coming to market. We have been working very hard to increase [platforming] in our business in any event which increases the efficiency on subsequent generation. So, I would actually tell you that we still see a pretty rich innovation pipeline coming from Plantronics. Now, where will we cut back? Yes, we will be cutting back, some of the breadth of offerings that we put out. We will be cutting back the frequency with which we put out offering. We will certainly be cutting back some of the sales and marketing activities. Some of the marketing obviously would not have the kind of ROI we would look for in this type of environment. And so it makes sense to reduce that. I do believe that we will still have a very good relative level of sales and marketing our activity. Paul Coster - JPMorgan: Great. Thank you very much.

Thank you.

Your next question comes from the line of Tavis Mccourt with Morgan Keegan.

Hi, Tavis. Tavis Mccourt - Morgan Keegan: Hi, how are you doing? A couple of questions – first, in terms of the gross margin in the OCC business. Specifically, I think in the last downturn the gross margin held up reasonably well in that business. Are you seeing the same dynamic in this downturn or have you seen some pricing pressure and some gross margin pressure?

Well, actually on OCC, and it is not that we’ve broke it out specifically, but it was a large part of the business and it did hold up pretty well and actually overall what we’ve called our standard margins are really holding up very, very well. And where the OCC business has been impacted this quarter and will be next quarter is the fact that just demand is down so much more reducing inventory so much in all product lines, not just in Bluetooth that the overhead associated with our PLAMEX factory and the supply chain organization, and all that becomes a bigger percentage of revenue. So we're having worse variances between standard and gross margin, but ultimately either this continues for a long time, when we reduce those levels of expense further or demand starts to come back and those get to the right ratios. But as far as not just kind of easy pricing environment, but it's the level of competition. There is a reasonable level of competition all the time and we are absorbing that pretty nicely and the outlook for cost reduction on materials and components is also a lot better now. It’s lower oil prices and more competition or less demand. So suppliers are more willing to deal. So some of those things should help as well. Tavis Mccourt - Morgan Keegan: And in terms of the guidance for the March quarter, I think OCC is one of your businesses that typically ramps through the quarter and obviously you guys are guiding kind of assuming no ramp. Can you give us some sense in terms of what the difference would be if you saw a typical seasonal ramp this year? I mean does that cut $10 million off of revenue guidance or is that like a $40 million or $50 million number?

Well, we didn't actually calculate that. So I'm a little reluctant-- Tavis Mccourt - Morgan Keegan: Or maybe an easy way to answer is, what is the typical linearity for that business in the March quarter?

We know how it behaves historically and we look at it over different time periods and ranges. And within the range that we have provided, it includes a little bit of a pickup in the upper range on the OCC, but it also is biased towards the flat to, it could be a bit worse.

I want to make one other comment, which is that the impact of FX is also fairly large here when we're comparing to different time periods, so both the euro and the pound being down significantly and our selling in local currencies, we have to look at that at a set rate that we assume for the balance of the quarter. Tavis Mccourt - Morgan Keegan: Fair enough. And I guess Ken, a couple of questions on the UC business as you see it now. What’s made the OCC business, we had a very good business over the years; it’s kind of been the decent amount of barriers to entry, a kind of a – (inaudible) for much of the word. And kind of a distribution channel that’s locked-up. In the UC business, you know what are the things that you think will make the dynamics of this business make it a good business over time? It seems like on the surface it would be a little more competition; maybe I’m underestimating the amount of development work and team work that goes in between the UC software vendors and the headset vendors. But can you talk about that at all?

Sure, a couple of things there. First of all, actually we think in some respects it's going to be a more challenging and different business for people who’d been our traditional competitors. And I'm not just referring to our primary competitor. Actually people under estimated the degree to which we have many other competitors in a variety of geographies. Many of them are, what I’d call, hardware only competitors. And if we say our primary competitor is more likely to compete on price than us, many of the other competitors compete really only on price. And this is now a market that will merge from being primarily hardware, okay, and yes, there is a fair amount of sophisticated firmware in a variety of the wireless products. But to something that is much more integrated with firmware, software and into the system in order to provide more effective user experience, more effective cost control, integration of presence, a lot of other things to make the entire experience more effective. And this is a big and important challenge again because, the gap for people moving from a phone to a computer for telephony is a big gap given the nature of that platform. I think that for us, it isn’t just about headsets, because we all recognize the things that we do very keenly as we try to grow this business, but it is difficult to get many people to use headsets. Many people don't want to use them. And the extent that we have a broader experience that we can offer, which isn’t just limited to headsets, but absolutely includes headsets. We can allow people to go across different applications. Some applications tend to be much more receipt. Many long conference calls requires many more received minutes than they have talked with us. For remote workers, many of whom prefer to listen in a far field mode – so if we can have a variety of different products that we can help people optimize their experience based upon their locations, based upon the device they're using, based upon the kind of application they have and make it to be a very easy and effective user interface and user experience, that is a much more significant challenge in many respects than just producing a hardware headset was in the past. So I think that's been part for us a transformation and there has been a transformation in terms of skill sets and of course in some respect coming at an awkward turn and the revenues are down and funding is therefore down. But it is a big investment, it's a big transformation and it's a big inflection point for us to potentially have not just hardware but significant software and system value adds quoting our margins. Paul Coster - JPMorgan: Thanks Ken that’s helpful. And if it makes you feel better, I love my headset.

Good.

Your next question comes from the line of Rohit Chopra with Wedbush. Rohit Chopra - Wedbush Morgan Securities: Hi guys I wanted to see if there was anything positive we can talk about. Can you, Ken, maybe talk about any share shifts in the quarter. Were you able to hold share while others maybe felt a little bit further either in the retail or the commercial products?

Let me caveat this a little bit by saying that we don't have perfect data on this for several reasons. One, none of our competitors to the best of my knowledge, really reported results, were able to compare kind of geography-by-geography and really know what's happening. Some of the data services do provide some reports, but frequently that's limited because it doesn’t include certain channels or certain individuals players and it’s not global. So with that as a caveat, actually we do think we had a good quarter. We do think that this difficult environment is probably worse on others than it is on Plantronics and dismal, as these numbers in this outlook appear to be – we actually think it represents, what I would call a strengthening of our position, measured by market-by-market. Some people have different mixes of business than us, and so a particular channel or geography might do better, but on an overall basis market-by-market we think we're doing well. Now the one thing I want to take against that is – I do know that they are worse in inventory clearing activity within the Bluetooth market, that we did not feel that we needed to participate in, and so looking at that activity alone, which is not profitable, we lost some share relative to that, but on an overall basis, we think we're doing quite well competitively. Rohit Chopra - Wedbush Morgan Securities: Ken, would you say that look we all understand that revenues are down, consumers have backed off, and commercial has backed off as well. But are there certain products maybe that you could point to, or are people trading down to something where you would say you know what – this is actually good for us in the long-run? Are there some products that you could point to that people are still buying?

Well, I mean people are still buying our products. Having said that it's hard for me to feel good about people trading down candidly. Probably our recorded B2B business held up a little bit better than our cordless – do I feel good about that? Not briefly. Within our Bluetooth range, I could again argue that perhaps some of the lower price points, are a little stronger, but do I feel good about it? No, again I really, it is hard for me to feel good about any of those things. I think it is fundamental in the market that there is a little bit of price sensitivity. Rohit Chopra - Wedbush Morgan Securities: One last question; are you guys involved in any promotional activity? I know you guys are talking about it next quarter and competitors are trying to dump some inventory? But are you guys trying to match, are people pressuring in that type of way?

So, we, generally speaking, in the last quarter did not match a whole lot of inventory clearing types of activities. Now there is always price pressure in various markets. And sometimes we absolutely do match. And we're certainly concerned about making sure that our own inventories are in control and in imbalance as well. So, that probably summarizes it well enough. Rohit Chopra - Wedbush Morgan Securities: Thanks Ken.

Your next question comes from the line of with Manuel Recarey with Kaufman Brothers. Manuel Recarey - Kaufman Brothers: Good afternoon, or evening here. So you just like understand kind of from a modeling purpose, see that the $40 million in annualized cost savings, on the OpEx side, we take as you said the fiscal second quarter at $63 million. As we move out that 10 -- that $40 million in annual savings, that’s just a cost savings from cutting the expenses that’s not due to just a lower revenue where you will have lower commissions and things of that nature? Is that correct?

No, it's really just the cost reductions. Manuel Recarey - Kaufman Brothers: Okay, so if you would look at specifically June or the September quarter as compared to the September quarter, that -- if the revenue is substantially lower, then the September quarter of 2008, then operating expenses should be lower, more than let's say $10 million less?

Well, I want to make one comment about --

We don't have a lot. We don't actually have a lot of, we have some commissions.

It's not a huge impact. Manuel Recarey - Kaufman Brothers: Okay.

I would just really roughly model the $10 million per quarter, and most of it. It's mostly related to ACG. AEG had been really done a rift and in the June quarter. And they had done the restructuring, prior to that at the factory level. So of that 40 million, only about a half million a quarter that relates to AEG. Manuel Recarey - Kaufman Brothers: Okay. That’s helpful. On the AEG side, can you just review for me the product rework that you spoke about? Could you just give a little bit more color on what happened there?

Yes. So there is a very popular product that we have called the [IM 600]. And we needed to come up with a new version of that in the summer quarter, because of some changes that Apple made, which we did. It was a pretty fast cycle and there were some complications with that -- that we discovered, that needed to be corrected in Q3 and then we also had – which we got done. And then we had to incur some airfreight in order to get those products in the hands of the customers that had ordered them. So that was fairly costly to the tune of about $1.4 million in the quarter. Manuel Recarey - Kaufman Brothers: And I'm sorry, what was the foreign exchange impact again?

There are two basis of this; one is going from Q2 into Q3, and thinking about it versus our guidance, and then there is the year-over-year impact, which was Q3 to Q3. But in any event, Altec has a fairly substantial portion of the revenue that is international. So its euro or pound denominated or Australian dollar denominated, and all of those exchange rates went dramatically against us. And those revenues weren't hedged, we are looking at a hedged offset. And relative to our guidance forecast that cost us about $1 million, which would be pure revenue and pure gross profit hit and a pure income hit. Manuel Recarey - Kaufman Brothers: Okay, thanks.

You're welcome.

Your next question comes from the line of with (inaudible) with Titan Capital.

Thank you, we have a couple you of questions, first of all, what impact if any do you see from the Northern Telecom situation both short and long-term?

Well, let me speak first just in terms of the AR side. There is basically nothing because we had no receivables exposure to the entities that were affected by that. There is a branch that isn't affected by this. Well we do have a balance, we have ongoing revenues. And so obviously, the balance is fine and we think that particular subsidiary will continue to be a customer going forward. Let me turn it to Ken to talk maybe more broadly about Nortel's role and any impact longer term from that.

Well, so I would really -- not venture any further comment about it long-term. I mean they are a key player historically and have been a partner. Lot of times companies operate rather effectively out of bankruptcy and so, our current expectation is that that’s more likely to be the case than not. But even if, so that should not be the case, it will then be some other player who absorbs the market share with whom we have a productive relationship. So, I don't really see this as changing the dynamics, regardless for Plantronics structurally.

Relative to the Unified Communications effort that you have underway, you don't see their situation as having any impact or implications, either positive or negative for you?

Not really, because Nortel is a leader, and they're allied with Microsoft. But if we look at some of the other players, we also have a close relationship with CISCO, with IBM, with Avaya, with Microsoft, with many others that are involved in this. And so, again I see them as a key player. But there is a certain amount of market and we intend to compete for that market, regardless of who the partners are that we compete with.

Thank you. And then on a completely different topic, your cost savings expense ratio, so basically you're talking nearly $10 million of restructuring expense to get $50 million of cost savings. That’s very high, relative to what we're accustomed to seeing, more than five to one ratio. What silver bullet or magic tricks were you able to pull out of the hat to accomplish that?

The restructuring charge, they're actually not $10 million. It’s more like $7.7 million to $8.2 million.

I'm sorry, Barbara, I was just rounding that up to make things.

Okay. There wasn't $10 million somewhere. It was a little bit under. I apologize. Slightly confused by the way you asked the question; because you were saying it seemed like a high ratio of expense relative to the savings.

My apology, I think I did say that. I actually meant the inverse, the cost to get the savings it was quite low or your savings to the cost was quite high relative to what we're accustomed.

It purely a mathematical basis, the kind of the way that numbers fell out and Barbara can perhaps educate. But I think that one of the most probable explanations is that not all of our savings came from personnel cost reductions. We had significant other savings that drove this, which included reducing outside spending for example on both personnel contract and services. Agencies, things that we used, projects and variety of other costs, which don't affect our internal personnel and therefore don't require any one-time charges.

Right, I think the other thing is that, we were also thinking about the need to do this. And so there were cases, where we were able to just make a decision not to replace someone who had left. And I would say we probably started heavily into that approach. Time is getting a little bit difficult to recall, but probably in October at least, I would say maybe even earlier than that, as we started to see a lot of the economic weakening. We were definitely not replacing leavers automatically and in some cases making very hard choices to do work differently.

Out of the part time changes that we made, which we didn't talk about in the management, compensation reductions also have no up-front costs associated with them?

Therefore as you are evaluating, if a next wave and the magnitude of that next wave, you won't be able to have as low a cost to benefit ratio, if you do decide the more needs to be done. Would that be a correct broad-view qualitative interpretation?

It will be tend a little bit on what exactly as we do, it might be too hypothetical me to answer successfully before we have done all the work on it.

That's fair. Thank you, folks.

Thank you.

We have reached the allotted time for questions. Due to the time, our last question will come from John Bright with Avondale Partners. John Bright - Avondale Partners: Thank you.

Hi, John John Bright - Avondale Partners: Hi, Ken. Let me follow this last guy’s question and take another stab at the fixed cost and I guess it probably is targeted towards Barbara. With low factor utilization impacting gross margins on the sales slump, what are you doing or what can you do to lower some of these costs?

So, what we have done is – it certainly reduced direct labor and indirect labor. And we are going after costs that are variable, such as material cost savings and related. Those types of savings which we're, actually really confident we're going to get aren’t in the $50 million. So that would be above and beyond that. In Mexico, we consolidated a number of our facilities, so that we could shed leased expense, and just gain some other efficiencies by not having as many locations. You know those are things that we have done, there are other things that we could do, but you know shedding, probably shedding more people is the most obvious, if we need to. John Bright - Avondale Partners: And --

Broadly, John, if we need to take action on fixed costs, we'll take them, because you know this is a very tough economic zone. And my commitment is we're going to try to manage this to be profitable and cash flow positive. John Bright - Avondale Partners: Got you. And the last one for you Ken. And it’s on the front page of your press release. You're evaluating alternatives to improve profitability. What is the process for doing that and the timeline?

So, the time line, which I tried outline, is that we expect to be able to update our shareholders and the public within a couple of months. The internal process of course, will involve careful review and analysis. It will certainly involve our Board of Directors looking a few times at the options and assessing them. It’s not the thing that we think; we're doing this for shareholder value to be clear. But we don't think we will enhance the shareholder value by discussing them too much in the public market. So, we don't intend up until a final determination and announcement to provide public updates to the shareholders. John Bright - Avondale Partners: All right. Thank you.

You may proceed with your presentation or any closing remarks.

Well, I just would like to thank all of you very much for taking the time to listen to us. Of course, we're available if you have any additional questions. Thank you very much, Keira.

Thank you and have a great evening. That concludes today's call. You may now disconnect.