Michelle Levine - IR Kevin Kennedy - President and CEO David Vellequette - CFO

Ehud Gelblum - JP Morgan Cobb Sadler - Deutsche Bank John Harmon - Needham & Company Mark Sue - RBC Capital Markets Jeff Evenson - Sanford Bernstein Ajit Pai - Thomas Weisel Partners Paul Bonenfant - Morgan Keegan Sam Dubinsky - Oppenheimer Todd Koffman - Raymond James

Good day, ladies and gentlemen and welcome to the JDSU Fiscal 2008 Fourth Quarter and Year End Earnings Conference Call. My name is Amay [ph] and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-session towards the end of this conference. [Operator Instructions]. I would now like to turn the presentation over to your host for today's call, Ms. Michelle Levine, Director of Investor Relations. Please proceed. Michelle Levine - Investor Relations: Thank you, operator and welcome to JDSU's fiscal 2008 fourth quarter and year end financial results conference call. Joining me on the call today are Kevin Kennedy, Chief Executive Officer; and Dave Vellequette, Chief Financial Officer. I'd like to remind you that this call is likely to include forward-looking statements about the future financial performance of the company. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectation. We encourage you to look at the company's most recent filings with the SEC, particularly the risk factors section of our report on Form 10-Q filed May 6, 2008. The forward-looking statements including guidance provided during this call are valid only as of today's date, August 20, 2008 and JDSU undertakes no obligation to update these statements as we move through the quarter. Please note that all numbers are non-GAAP unless otherwise stated. A detailed reconciliation of these non-GAAP results to our GAAP results as well as a discussion of their usefulness and limitations is included in today's news release announcing our results available on our website at www.jdsu.com. Finally and as a reminder, this call is being recorded and will be available for replay from the Investors portion of our website at www.jdsu.com/investors. I would now like to turn the call over to Kevin. Kevin Kennedy - President and Chief Executive Officer: Thanks, Michelle and good afternoon. JDSU's results for fiscal Q4 and for the full year of 2008 reflects year-over-year improvement as well as further opportunities to advance our financial model and reach are desired, sustainable long-term financial targets. Highlights for JDSU's fiscal fourth quarter non-GAAP results include but are not limited to revenue of 390.6 million, near the middle of our stated guidance range, representing 11% year-over-year growth. Test and Measurement represented 44% of total revenue, Optical Communications 37%, AOT 13% and lasers 6%. Gross margins for the quarter were 40.9%, down from 42.6% in the fiscal Q3 and up from 37.4% in fiscal Q4 07. Year-over-year, all four businesses improved their gross margins. Operating margins of 2.2% compares to our 1.2% operating loss for the year ago period. Once again, all four business segments saw positive operating margins. JDSU's adjusted EBITDA as a percent of revenue was 6.4% compared to 3.3% for the year ago period. The company was free cash flow positive for the sixth quarter in a row. Book to bill for the company as a whole was greater than one, all four business segments had a book to bill greater than one. We continued to have strong geographic diversity and less than 50% of total revenues came from North America. For the full fiscal year, non-GAAP results show revenue exceeded 1.5 billion, growth of approximately 9.5% when compared to revenue of 1.4 billion in fiscal year 2007. Three out of four segments saw a full year revenue growth in fiscal 2008 compared to fiscal 2007. The CommTest segment grew 12%, Optical Communications grew 6% and Advanced Optical Technologies grew 21%. Gross margins grew to 42.8% in fiscal 2008 compared to gross margins of 37.7% for fiscal 2007. Gross profits of 655.7 million, representing 25% growth from the prior year, reflects momentum from our lean initiatives and favorable product mix. Additionally, three out of four business segments saw improvements in gross margins for the full fiscal year. Operating margins were 5% in fiscal 2008 with a substantial improvement from fiscal 2007 where operating margins were less than 1%. JDSU's adjusted EBITDA was positive 9.3% of revenue for the year and the highest in six years. The company was net earnings per share positive in all four quarters of the year. EPS for fiscal 2008 was $0.50, an increase of over 72% when compared to fiscal 2007. Free cash flow for fiscal 2008 was positive in all four quarters. Fiscal 2008 free cash flow was 108 million or 7% of revenue when you exclude the benefits from security settlements. To summarize, fiscal 2008 was a year where we transitioned the company from a focus on restructuring to a focus on continuous improvement through lean initiatives and improving financial metrics. These results evidence progress against our plan to achieve our long-term financial model. Our goal remains to achieve our long-term model of 10% operating margins on a sustainable basis by the end of this calendar year. Further on results, before discussing the segment reports, I would like to reiterate that our strategy continues to be to execute as a diversified technology company with a focus on optical and broadband innovation. We embrace this view such that the composite company would be better able to navigate fluctuations in any one constituent business. In fiscal Q4, we continued to see favorable end market indicators for broadband services and network buildouts and we believe broadband capacity will continue to expand as higher data rates are being delivered to the access/edge, accompanied by video applications and high-definition network requirements. However, there remains a level of uncertainty due to economic conditions. For example, in North America telecom, we witnessed a pattern such that a few largest providers increased their spending while the smaller service providers evidenced cautionary practices. Relative to the businesses that serve consumer markets, we saw pullbacks in commercial lasers that enable semiconductor inspection and holograms that protect credit card authenticity. Now I'll provide more detail on the business segments. First, Communications Test and Measurement. Our fourth quarter fiscal 2008 Test and Measurement revenue was 170.5 million, up 1% sequentially over fiscal Q3. Book to bill was greater than one for the quarter. Fiscal Q4 year-over-year revenues were down 2.5%, although revenue for the 2008 fiscal year was up 12% compared to fiscal 2007. I would like to note a trend in our business with respect to our revenue growth in 2008. If we look at our fiscal 08 growth and exclude the fiscal 2007 revenue surge from our cable business, we find that our growth for Test and Measurement business was 50% [ph] in fiscal 2008 and almost 6% in sequential growth from fiscal Q3 to fiscal Q4, consistent with our model. And sales to our three largest customers grew quarter-over-quarter for the last two quarters. Fiscal Q4 gross margins for our T&M business were below the prior quarter and our target range due to product mix. We expect our gross margins to improve due to a number of new higher margin products beginning their ramp this quarter and as a result of our lean initiatives. For fiscal 2008, gross margins improved by nearly 2 percentage points compared to fiscal 2007. Quarterly operating margins decreased sequentially due to the lower fourth quarter gross margin. When looking at the full fiscal year, 2008 operating margins improved to 16.5% from 15.2% due to an improvement in the gross margins for the year. We expect to see improvements in our gross margins and operating margins as a result of the lean initiatives and change management actions throughout fiscal 2009. Comparing fiscal 2008 geographic diversity with fiscal 2007, we note the following results and trend for our products. North America grew approximately 6% despite cable network operator investment being flat. We do see broadband expanding with spending focused on network buildout projects and investment in Ethernet, high-speed fiber and video deployment. We saw growth of nearly 80% in Latin America where Greenfield buildouts are increasing. Europe has shown strength, growing at 16%; Asia increased by 12%, where we are seeing particular strength in India. Our Communications Test and Measurement segment is structured along three product groups, each of these unit's portfolios address a portion of the lifecycle of the communications network market. First, Lab and Production, which supplies test equipment for development, system verification production. Comparing fiscal 2008 to fiscal 2007, this unit had the strongest performance of the three product units. A significant driver of this growth is the transition to 40-Gig. Next, Field Services, with supplies both telecom and cable instruments to install and troubleshoot broadband triple-play services. This is the largest product group in the segment in terms of revenue. Comparing revenue for fiscal 2008 versus 2007, this product group experienced good growth, as service providers continued to build out the access player and offer fiber-to-the-curb or fiber-to-the-home as well as new services. We would expect demand for field services test products to continue to grow. Service assurance solutions, which ensure quality of services by providing end-to-end network test and monitoring, revenues in this product group grew modestly in fiscal 2008 versus 2007. Service assurance is usually the last type of testing that is performed once the network is build out and services and applications are made available. Therefore, we would expect this unit to lag in growth as service providers are currently at the early stages of services deployment and usage. Our copper test business grew over 50% in 2008 compared to 2007, fueled by the continued growth of ADSL to VDSL2. And our fiber business grew double-digits in 2008, almost two times the market growth. Next to innovation. We continue to expand our position with network equipment manufacturers with new lab and production test solutions. MAP-200 product launched in June, speeds the development of next generation fiber network systems with an in-depth analysis of network element performance. Now we are providing service providers with field tools and services assurance systems to speed triple-play service delivery and ensure quality. For example, the T-BERD 6000, a 10-GigE field test for IPTV and other IP-based service performance is attracting a new customer base to JDSU. Tier 1 U.S. telecom service providers continued the strong adoption of JDSU's FTTx tools, including the SmartClass Home, HST T-BERD for triple-play service delivery. In Car Phone Warehouse Network, the UK's third largest broadband service provider, picked JDSU net complete service assurance solution, to ensure high quality of business and consumer service delivery. Moving on to the CommTest business model, as we transition from 2008 to 2009, we believe that the annual growth rate for this market will continue to be in the 6 to 12% long-term range as carriers continue to invest in their networks to offer regional broadcast, video and high definition services. We continue to see growth in broadband deployment driven by IP internet access services and wireless platform. We expect cable to be flat 2008 to 2009 and we expect our fiber business to continue to grow in 2009 at current growth rates. We expect improvements in mix, as our lab and production portfolio will reflect seasonal growth as well as improvements in gross margins. We're also putting greater emphasis on gross margin and operating expense improvement through lean and our changed management initiatives. As a result, we expect to benefit from consolidation of R&D side lower cost due to back office consolidation and more extensive use of contract manufacturing. To help implement these initiatives, Tom Waechter, our CommTest General Manager has placed new leadership in key roles in sales, marketing and operations and in our Asia sales. These new leaders all of experience in businesses of $1 billion or greater of revenue, position us well for the next level of growth. Next, Optical Communications. Optical Communications' total revenue was 145.1 million in the fourth fiscal quarter compared to revenue of 136.1 million in the third quarter of fiscal 2008, representing a 7% sequential growth and 33% growth year-over-year. This is the fourth consecutive quarter of sequential growth. In the fourth quarter, seven out of 10 major product lines grew sequentially including products in all three served products areas that is transport, transmission and photonics. We saw a booking strength in fiscal Q4, as book to bill was greater than one. This is the fifth consecutive quarter of sequential bookings growth. 2008 fiscal year revenue for Optical Communications was 527 million, up 6% compared with 496 million in fiscal 2007. We saw the most growth during this year in ROADMs, transmission components, consumables, submarine and hand Gig transceivers. We have shipped over 22,000 ROADMs to date and grew our shipments by 69% in fiscal 2008 versus 2007. We are starting to see a wider acceptance of ROADM technology outside of North America. In Q3, we began shipping ROADMs for use in a European network and in Q4, this trend has continued. We see this as favorable for this technology and positive for our opportunity in this market. There is clear trend of moving towards Ethernet and DWDM mesh architectures. Gross margins improved in fiscal Q4 compared to fiscal Q3. We are seeing improvements in certain product lines, albeit sequential growth was suppressed mainly due to supply and capacity constraints for several products including ROADMs. Fiscal Q4 gross margins nearly doubled compared to fiscal Q4 2007 and for the full year, 2008 gross margins grew over 30% compared to fiscal 2007. These results are evidence of the success of our lean initiatives across the segment. For the third quarter in a row, operating margins were positive at 5.4%. For the fiscal year 2008, operating margins improved to 3.9% versus an operating loss of 2.9% for fiscal year 2007. With regards to geographic mix, we saw sequential growth in all three geographies. Additionally, over the last four quarters, our revenue from network equipment manufacturers in the APAC grew, increasing the non-North America business mix. We saw particular strength in China and Japan. We observed the following in the transport transmission and photonics product areas. The transport product group remains strong, driven by the following trends: DWDM meshed architectures, the IP photonic layer and the moves towards more highly integrated platforms. The transmission product group is driven by the following trends such as higher speeds, smaller form factors, increased performance, lower power and lower cost. The telecom portion of the transmission segment remains strong, primarily driven by growth in tunables. We continue to be focused at the photonic layer and our vixel product line. It is worthy to note that since we acquired Picolight, we have added three new vixel customers. We do observe, however, that the enterprise portion of the transmission segment has slowed recently. Our strategy in Optical Communications remains unchanged and we continue to look for ways to accelerate our progress in this segment through our focus on three strategic principles, being technology leadership, cost leadership and functional integration. First, relative to technology leadership, we remain focused on key growth areas with sustainable differentiation and value add. The transport space, this includes ROADMs, amplifiers, vertically integrated components and highly integrated platforms such as circuit packs and the AON Super Transport Blade. In the transmission space, this includes tunables, 8 and 10 gig transceivers and vixels. Fiscal 2008 evidenced a strong emphasis on innovation with the following highlights. In Q1, we introduced the ILMZ PIC, photonic integrated circuit. In Q2, shipped our 400,000th 980 nanometer pump. In Q3, we launched the world's smallest tunable optical transmitter and we also entered the GPON market with a receiver. And in Q4, we announced four new platforms in many wavelength selectable switch; the nano we're going select selectable switch; the AON Super Transport Blade and the AON Embedded Operating System. Second strategic principal for Optical Communications is cost leadership. In 2008, JDSU began implementing lean manufacturing initiatives. We continue to make progress on lean programs and continue to interlock that our customers. Lean manufacturing initiatives are expected to continue to improve production cycles, lower manufacturing and material costs and reduce inventory levels. Third, functional integration. In fiscal 2008, we introduced a number of platforms that possess high functional integration. Customers have demonstrated enthusiasm for these new product platforms. I would like to share data on our current and expected progress for this new product cycle. Our tunable XFP platform remains on schedule as we expect to ship 80 units in fiscal Q3 09 with production shipments starting in fiscal Q4 09. Beta unit shipments of the mini WSS platform begin shipping in the current quarter. Production shipments expected in fiscal Q2 09. The AON Super Transport Blade platform has gained good customer acceptance as we currently have secured several design wins. Beta shipments will start this quarter and we expect to ship the product in fiscal Q2 09. September, we plan to launch a new functionally integrated platform at the European Conference on Optical Communications. To support design wins and the development of these new products, our R&D investment has increased, albeit along with revenue growth. We expect this new product cycle to fully ramp in the second half of fiscal 2009, which will support further revenue growth and improve gross margins, at the same time R&D spending will begin to decline slightly as a percentage of revenue. To summarize, the demand for our optical components continues to trend upward. We continue to believe that the annual long-term growth potential for this market is with in the 5 or 15% range, fueled by telecoms move to DWDM. Moving on to our Advanced Optical Technology segment, fiscal Q4 revenues for ALT was approximately 53 million at decline of 5.2% compared to the third quarter of fiscal 2008 and up 18.3% compared to fourth quarter of fiscal 07. Excluding the revenue from ABNH, Q4 year-over-year revenue growth was 13.5% and fiscal year 2008 growth was 15.4% compared to fiscal 2007. The currency market had provided strength to this business driven by pre-Olympic currency trend in China, general inflationary trends, convergence of new denominations and redesign activities. As we have noted before, we expect the trending of this business to have some level of surges and ebbs, Q4 declined slightly coming off of a strong Q3 driven by the currency market. Due to the U.S. economic slowdown, the issuance of transaction card has declined which is attributed to the softness of the ABNH revenues. This quarter AOT generated an operating margin of approximately 34%. For the full year of fiscal 2008, the operating margin was 37.2%. Favorable mix, higher volumes and improved factory absorption contributed to the healthy margin. Integration of ABNH is proceeding and we are experiencing some early customer acceptance of an overall solution strategy using technology from ABNH and from JDSU's Flex products. As we entered the new fiscal year, we are on the ebb tide of currency strength associated with China and ebb tiding credit card related revenues due to the banking struggles. However, we believe that the annual growth rate for this market will continue to be in the 5 to 15% long-term range. In Commercial Lasers, fourth quarter fiscal 2008 revenue was 22.1 million, down 3.9% from the third quarter of fiscal 2008 and flat compared with the fourth quarter of fiscal year 2007. For the full fiscal year 2008, revenues declined 9.1% compared to fiscal 2007. This business continues to be impacted by lower demand from semi conductor manufacturing equipment customers. Despite the decline in revenue, we saw an improvement in gross margin quarter-over-quarter. In fiscal Q4, gross margin improved due to increased productivity and lower material cost. Contribution margin was positive for the second quarter in a row due to gross margin improvements. As we transition to the new fiscal year, there are market product portfolio manufacturing strategy transition is underway. First, the semiconductor market slowdown continues to negatively affect our top line. We don't see a recovery in the semiconductor market occurring until sometime in calendar 2009. Meanwhile, our business in the bio-medical market is growing. Our solid-state business is lower over 50% of our revenue and is anticipated to grow to over two-thirds of the business during the fiscal year. Gross margins have continued to improve and have reached the best level we have seen in several years, despite the slightly lower revenue in our fiscal fourth quarter. We continue to improve our quality, operations, and supply chain performance, and believe there is more improvement to come in these areas. In July, we embarked upon an additional gross margin improvement initiative which will transfer our solid-state manufacturing to an Asian contract manufacturer. We believe this move will improve our competitiveness and further improve our gross margins. We expect the manufacturing transition to be completed during calendar 2009. We believe these initiatives once fully implemented will result in a 5 to 10 point laser gross margin improvement relative to current level. On the product development, we will continue to be focused on solid-state and fiber laser platforms. In term of other corporate activities, on May 15th, the Board of Directors authorized a repurchase of up to 200 million of JDSU's common stock. This past July, we announced the completion of this program. Totally, we repurchased 17.2 million shares. Now to summarize, we set out at the beginning of fiscal 2008 with the intension to advance JDSU's business model. We expect that each business within the portfolio to continue to improve its operating results. As related to the fiscal year we have moved towards achieving our model gross margins in the range of 43 to 47% and operating margins at or above 10%. The efficacy of the model was substantiated in fiscal Q2 08, our goal remains to achieve this model on a sustainable basis by the end of the calendar year. We have specific plans in place which achieve these goals at revenue levels of 400 million per quarter and total gross margins of 46%, which models CommTest revenues at roughly 45% or greater of revenues. As I discussed earlier, current economic conditions have caused a level of uncertainty in the markets we participate in which has increased the risk across our business. We have created a plan that reaches our financial goals under the current telecom economic climate, albeit we have initiated work on bottom line improvements that will push impossible deviations due to the economic climate. In addition, we will pursue mergers and acquisitions that fortify or augment our existing businesses. Our priorities for fiscal 2009 are to accelerate profitable growth, improve the company's operating performance and efficiency, increase free cash flow and fourth, improve predictability such that the impact of seasonality and gross margins is reduced. In closing, I would like to thank JDSU employees whose focused commitment continues to advance the company's business model. And with that, I'll hand the call over to Dave. David Vellequette - Chief Financial Officer: Thank you, Kevin. Before I start, please note that all numbers are non-GAAP unless I state otherwise. Fourth quarter revenue of $390.6 million was up 1.7% from the prior quarter and up 11.3% when compared to the fourth quarter of fiscal 2007. Fourth quarter growth was driven by the Optical Communications segment. In the fiscal year, total revenue was $1.53 billion, up more than 9.5% from the prior year's $1.4 billion. In fiscal 2008, we saw growth in all geographic regions and in three out of four business segments. Our Test and Measurement segment grew 12%, the Optical Communications segment grew 6%, and Advanced Optical Technologies grew 21%. Our Commercial Lasers business declined 9% due to the lower demand from our semiconductor equipment manufacturing customers. Fourth quarter gross profit of $159.8 million or 40.9% of revenue was up from the fourth quarter 2007 gross margin of 37.4% of revenue, but down from the previous quarter's gross margin of 42.6% of revenue due to the CommTest product mix. For the full fiscal year, gross profit of $655.7 million or 42.8% of revenue was up 24.5% from fiscal 2007's $526.5 million or 37.7% of revenue. All business segments except for Lasers improved their gross margins in the fiscal year. Operating expense for the fourth fiscal quarter of $151.4 million or 38.8% of revenue was up from the prior quarter's $147.6 million. The increase included a full quarter's expense from the ABNH acquisition and temporary expenses associated with change management initiatives, our ERP upgrade activity and incremental legal costs which were primarily associated with the patent litigation settlement. These temporary charges represented approximately 1.5% of revenue. Operating income for the quarter was $8.4 million or 2.2% of revenue, up from fourth quarter 2007's operating loss of $4.3 million, but down from $15.9 million or 4.1% of revenue in the prior quarter due to fiscal Q4's lower gross margins slightly higher operating expenses. For the full fiscal year, operating income was $77.7 million or 5.1% of revenue, which compares to $11.5 million or less than 1% of revenue for fiscal 2007. For fiscal 2008, the CommTest, Optical Communications and AOT segments all saw improved operating results. Fourth quarter net income was $15.5 million or $0.07 per share. Net income for the full fiscal year was $114.9 million or $0.50 per share, which compares to net income of $64.1 million or $0.29 per share for fiscal year 2007. Adjusted EBITDA for the fourth quarter was $25.1 million or 6.4% of revenue, which compares to adjusted EBITDA of $11.7 million or 3.3% of revenue for the prior fiscal year's fourth quarter. For fiscal year 2008, adjusted EBITDA was $142.9 million or 9.3% of revenue, which compares to adjusted EBITDA of $72.9 million or 5.2% of revenue for fiscal 2007. A detailed reconsolidation of our non-GAAP results to our GAAP results is available in today's press release. Our fourth quarter non-GAAP results exclude among other items, other income from a security settlement for $61.6 million, a $45.4 million reduction for goodwill and intangible associated with the ABNH and da Vinci acquisitions, accruals for patent and other litigation settlements of $20.8 million, amortization of acquired technology and intangibles of $20.5 million and a $12.5 million charge related to stock-based compensation. Including these items, the fourth quarter fiscal 2008 GAAP net loss was $29.8 million or a loss of $0.13 per share, which compares to a prior year fourth quarter GAAP net loss of $17.9 million or a loss of $0.08 per share. For the 2008 fiscal year, GAAP net loss was $21.7 million or $0.10 per share, which compares to a GAAP net loss of $26.3 million or $0.12 per share for fiscal year 2007. Moving to the segments; in the CommTest segment, fourth quarter revenue of $170.5 million was up slightly from third quarter's $169.3 million. For the full fiscal year, CommTest revenue of $710.6 million was up 11.9% when compared with $635.2 million for fiscal year 2007. The CommTest fourth quarter operating profit of $19.2 million or 11.3% of revenue declined when compared to the operating profit of $22.8 million or 13.5% of revenue in the prior quarter. This decline was primarily due to lower gross margin. For the full fiscal year, the operating profit for the segment was $117.2 million or 16.5% of revenue, which was up when compared to the operating profit of $96.7 million or 15.2% of revenue for fiscal 2007. In the CommTest segment, we are engaging in a number of lean and changed management initiative focused on our manufacturing model and business operations. We expect these initiatives will yield financial benefits starting in fiscal Q1 and we expect to complete the current set of initiatives over the next 12 months. We believe that these initiatives will increase the segment's operating income by 3 to 5 percentage points. In the Optical Communications segment, revenue for the quarter was $145.1 million, up 6.6% when compared to the prior quarter. Each of the three product areas experienced sequential revenue growth. For the full fiscal year, Optical Communications revenue was $526.9 million, up 6.2% over the prior fiscal year's revenue of $496.1 million. The Optical Communications' quarterly operating profit of $7.9 million or 5.4% of revenue was up from the prior quarter's $6.3 million operating profit. For fiscal year 2008, the operating profit of $20.8 million was compared to an operating loss of $14.2 million in fiscal 2007. This reflects the impact of a higher revenue in the cost reduction initiatives that were implemented over the last fiscal year. The fourth quarter results evidence that we are making progress with our gross margin improvement initiative. These results however are impacted by supplier limitations and factory utilization challenges for certain products. We believe that we still have gross margin improvement opportunity in this segment. These opportunities will come from execution on our lean manufacturing initiative, which include increasing factory utilization and approving the flow of material from our suppliers. We believe that these initiatives will increase the segment operating profit by 3 to 5percenatge points over the next year. Our Advanced Optical Technologies or AOT segment's quarterly revenue was $52.9 million, down 5.2% from the prior quarter, primarily due to lower revenues from the currency market. For the year, AOT revenue was $206.5 million, an increase of 21.5% from $170 million for the prior fiscal year. AOT operating profit for the quarter was $18 million or 34% of revenue. For the year, AOT operating profit was $76.8 million or 37.2% of revenue, which compares to 52.6 million or 30.9% of revenue for fiscal 2007. We expect the operating profits for AOT to fluctuate a 1 to 3 percentage points due to the impact of product mix in the segment. In our Commercial Lasers business, fourth quarter revenues of 22.1 million declined 3.9% from the prior quarter and was down... or and was flat year-over-year. For the fiscal year, revenue was $87.2 million, down from $95.9 million in fiscal 2007. The decline in revenue is due to lower demand in our semiconductor equipment manufacturing customers. In the fourth fiscal quarter, Lasers had an operating profit of $1.4 million, an improvement from last quarter's operating profits of $900,000, primarily due to improved gross margins. We believe that we have additional gross margin improvement opportunity for Lasers as we increase our solid-state laser volumes in concert with transitioning our solid-state manufacturing to Asia over the next year. We believe that these opportunities will increase the segment operating profit by 5 to 7 percentage points over this period. Now, looking at revenue by region. During the year, the geographical mix of our revenues has remained balanced. In the fourth quarter fiscal 2008, the Americas contributed 50% of revenue, EMEA 29% and Asia Pacific 21% of revenue. Revenue growth by region for fiscal 2008 as compared to fiscal 2007 show that the Americas grew 5%, EMEA grew 16% and Asia Pacific grew 15%. Moving to the balance sheet. For the sixth quarter in a row, the company was free cash flow positive and total cash at the end of the fiscal was $903 million. During the quarter, we reduced our outstanding current debt balance of 75 million and we bought back 9.9 million shares of common stock for $113.2 million. Subsequent to the fiscal year end, we completed our common stock buyback program and in total we repurchased 17.2 million shares under the program Head count as of June 28, 2008 was 6695, down from 6745 at the end of the previous quarter. Moving on to our operating model. We remain focused on achieving our goal of sustainable operating margin of 10% or greater by the end of the calendar year. Each of our business segments is engaged in improving their operating margins primarily through improving their gross margins. We expect that these improvements will not only improve the cost structure of our business as a whole, but also reduce the impact of segment mix on our operating margins. Additionally, we believe there is a level of economic uncertainty in the markets that we serve. This uncertainty may result in fluctuations in demand for our products over the next several quarters. Therefore, in addition to the continuous improvement activities noted above, we're taking additional proactive steps to lower our cost structure. We believe these proactive cost reducing steps along with the reduction of the temporary charges previously noted will improve our operating margins by approximately 3 percentage points for fiscal Q2 2009 and for the reminder of the fiscal year. To summarize, at a revenue level of 400 million per quarter and total gross margins of 46%, which model CommTest revenue at roughly 45% of the revenue mix, we believe that we will be able to sustainably achieve operating margins of 10% or better as we exit the calendar year. Now looking forward. Some points to consider as you think about our financial performance over the coming quarters. We'd typically experience a seasonal slowdown in fiscal Q1 given European vacation. As noted, there is a level of economic uncertainty in the markets that we serve. Also, several Optical Communications product due to increasing demand experienced supply and capacity constraints in the last fiscal quarter. These products continue to be constrained and as a result, we have scheduled $10 million of fiscal Q1 demand for shipments in Q2. Finally, we expect our quarterly tax provision to range between 3 to $5 million. Taking into consideration the factors above and based on our current visibility, we expect first quarter revenue to be in the range of 378 million to $394 million and non-GAAP operating margin in the 3 to 6% range. Operator, we are now ready to begin the Q&A. Question And Answer

[Operator Instructions]. Your first question comes from the line of Ehud Gelblum of JP Morgan. You may proceed. Ehud Gelblum - JP Morgan: Hi, thank you. Can you hear me okay? Kevin Kennedy - President and Chief Executive Officer: Hi Ehud. Ehud Gelblum - JP Morgan: Hi guys, how are you? A couple of questions if I could. First of all, on the last two things that you just said that I thought [ph] were kind of interesting. The pushouts in Test and Measurement into Q2, if you go in a little more detail. Are those things that you closed this quarter and then were supposed to ship next quarter, but you are now shipping the following quarter? When will actually close in terms of revenues? And is that a sign of other things, extending sale cycles or anything of that sort? How should we be taking that? And then I have some questions... and then the second question I had on the things that you just mentioned now was that the new head count reductions and the new rightsizing that you just talked about that would add 3 points of margin. You are still going... you are still targeting the 10% plus operating margin ending the calendar year. So are we to understand that previously, you were aiming for that 10% plus without having to do this and now you are counting on some more reductions to help you to that 10% plus? So does that reflect... the gross margin is still the same... does that reflect a different mix that you are expecting or am I misunderstanding the way the business works? Kevin Kennedy - President and Chief Executive Officer: Ehud, I think we have the gist of it. I am going to let Dave answer the second one. I am going to try to answer the first one. I think you may have actually posed two questions, and if I get it wrong, I apologize. But I think the... it sounded like there was a question in our prior conference call, we had had CommTest business that had escaped beyond the boundary of the quarter. The message there was the majority of that business closed in fiscal Q4. So was that a indication of some of the smaller but more cautionary spending from some of the smaller carriers in North America for CommTest having larger or longer approval cycles? It is. But the real message is in general, those things that we targeted closed, and so let me put that aside. The second piece was what Dave had mentioned in his guidance was that there are certain product lines such as ROADMs and tunables where the forecasts have been rising faster than the increased capacity that we've been building. And so we've found ourselves in a supply constrained mode for fiscal Q1. And about 10 million of that we have scheduled into fiscal Q2 despite the fact that the customers have asked for it earlier. So I mean separate [ph] items. I hope I was clear on those two. Dave, you want to take a crack at the second question? David Vellequette - Chief Financial Officer: Yeah, Ehud, you asked about the 3 points of operating profit opportunity. So the temporary charges, we noted those in the previous call, so I was just reiterating those. And I think this is the first time we have put a percentage impact of what those charges are. And the rest of it is actions we're taking so that as we... if experience any jitter in our revenues due to economic uncertainty, we have provided so that we can still meet our model. Ehud Gelblum - JP Morgan: Okay. Kevin Kennedy - President and Chief Executive Officer: The real measure there [ph] Ehud is that, as you can see, our predictability struggles if there's large mixes, swings in mix. And so some of the work we're doing is just to try to cushion us against the large swings in mix. Okay? Ehud Gelblum - JP Morgan: Okay. Kevin Kennedy - President and Chief Executive Officer: Thanks so much. Michelle Levine - Investor Relations: Next question please. Operator: Your next question comes from the line of Cobb Sadler of Deutsche Bank. You may proceed. Cobb Sadler - Deutsche Bank: Thanks a lot. On your comments on the enterprise business being a little bit weak, I am assuming that's SFP plus. And can you talk about... is that kind of across the board or is it... you have one or two kind of major customers that maybe digesting some inventory are slowing down a little bit? Then I have a follow up. Thanks a lot. Kevin Kennedy - President and Chief Executive Officer: Yep, Cobb, I would say that it reflects SFP plus but also other codes or putables. And it is certainly reflective of more than one customer. I don't think we are best beacon for the directionality of that market. But at least if I were to take your question and aim it just specifically to our experience, it's more than just the SFP plus and it is more than one customer. Okay? Cobb Sadler - Deutsche Bank: Okay, great. And the Picolight business, is it more... I mean is it transceivers or vixels at this point. If it was more vixels when you bought it, would you say that's changed or not? Kevin Kennedy - President and Chief Executive Officer: No, I would say that the revenues are still driven by modules and transceivers, however our growth and success is more measured today by the... our diversification of our customer base with net source. Okay. Cobb Sadler - Deutsche Bank: Okay, great. Thanks a lot.

Your next question come from the line of John Harmon of Needham & Company. You may proceed. John Harmon - Needham & Company: Hi there, good afternoon.

Hi John.

Hi John. John Harmon - Needham & Company: You had a couple of restructuring charges in the quarter and you were talking about your lean manufacturing program. Which are the areas that you are targeting for the most cost reduction or oil where you might have the greatest opportunity? Kevin Kennedy - President and Chief Executive Officer: John, let me break it into two, only one of the two can I answer and I'm going to ask Dave for help. In terms of looking forward, I'd say the primary areas were where we have deterministic plan from timeline is on the movement towards a greater use of contract manufacturing for our CommTest business. And that will take two things as we say in the script, there would be some R&D side consolidations and then from our gross margin and lean perspective, cash flow improvement perspective, the consolidation and very use of contract manufacturing, that side would be the most significant. Dave, relative to the specific charges in this quarter, could you help John on that? David Vellequette - Chief Financial Officer: Yeah. They were approximately evenly split between the CommTest area and the Optical Communications area and the related reductions of head count and facilities. John Harmon - Needham & Company: Okay thank you. And just one quick one, if I may. In terms of your ROADM unit volume, is it still predominantly your PLC ROADMs so you're seeing good growth in other technologies like liquid crystal? Kevin Kennedy - President and Chief Executive Officer: No, I'd say our predominant technology in terms of share and shipment volume is with... is a MEMS switching based technology, so those are the wavelength selectable switches. We have some... the liquid crystal that we have used in the past was more for the core and long haul application which is a smaller piece of the market, the Metro applications have greater and that's mostly a MEMS switch. And you are right to observe that as we continue to go market... go down market, there will be multiple technologies that we compete which will be liquid crystal, thin film and MEMS. So we are fortunate to have most of those technology in-house. Thanks, John. John Harmon - Needham & Company: Great, thank you.

Your next question come from the line of Mark Sue of RBC Capital Markets. You may proceed. Mark Sue - RBC Capital Markets: Kevin, do you think the business linearity is getting any better in the CommTest division, if anything it seems to be becoming more seasonal and any thoughts on why the weakness from the Tier 2 carriers may be temporary? And David for you, where is the confidence coming from on your long-term gross margin targets? It seems like a steep climb to 43 to 47%. Is some of that related to just kind of the near term mix and recovery of the Test and Measurement? Kevin Kennedy - President and Chief Executive Officer: Let me take on the predictability side of CommTest in particular. I'd say one of the challenges of helping people through our model is that we did have this very, very significant surge in cable as you will recall. CommTest grew... has basically doubled in the three years that we have owned the Acterna asset and in the last fiscal year, we grew on the order of 25 plus percent. So coming off of that surge, which was cable related, we see slower overall growth. On the other hand, as we try to point out, if you were to take that surge out, our growth was actually on the order of 15% year-over-year. So normalized for a telecom market, we feel pretty good with the predictability in the fact that its operating with the model. If there was any thing that we are going to continue to focus on in terms of predictability within this business will be two. One is, this should be a place where we continue to have significant improvement in gross margins or shall I say, we shouldn't have fallen out of our target range this particular quarter. I think moving to a greater contract manufacturing dependence will help us with that. The second thing is in terms of the mix of that business, as it moves and diversifies away from just field service, but has a services component to it and a lab and production, we'll begin to modulate the seasonality to your point. So those were the... those are really the two pieces. Dave, you want to pick up on the gross margin question? David Vellequette - Chief Financial Officer: Yeah, on the... my confidence of getting to the 43 or 47, as noted, we did improve the efficacy of the model in the December quarter. In the March quarter, we were just under the 43% range and we believe that with the steps we're taking, as Kevin just noted, you go to more contract manufacturing and to, as we noted, the laser business moving to Asia manufacturing, we believe that those are steps we're taking that will help get us into that range on a sustainable basis. Mark Sue - RBC Capital Markets: And there is nothing-- Kevin Kennedy - President and Chief Executive Officer: This year we've finished at an average of 42.8 for the year. So if you take Dave's summary at the end of each business where he is arguing that there is a one to two, in some cases five or more points increase, the title will just continue to raise and will move from that 42.8 to 40... in the middle on that range. Okay? Mark Sue - RBC Capital Markets: Okay, thank you.

Your next question comes from the line of Jeff Evenson of Sanford Bernstein. You may proceed. Jeff Evenson - Sanford Bernstein: Hi. One mechanical thing and then a more general question. On the mechanical thing, if you could go over your share buybacks and, at least from our first look, your share count went up and just explain how that happened. And then second, wondering if you could go through some of the initiatives that are going to help your overall predictability. David Vellequette - Chief Financial Officer: Okay. So the share count going up is probably primarily because of the fact that we finished the ABNH acquisition in the third quarter, but buybacks started late in the fourth quarter. And so it becomes just literally a weighted average, right. We expect that the weighted shares outstanding fully diluted in the first quarter will be closer to the 222 to 223 range. Is that right, Jeff? Jeff Evenson - Sanford Bernstein: Right. Yes, yeah. Absolutely. Kevin Kennedy - President and Chief Executive Officer: Jeff, let me help you with the predictability. There is basically six, I would say, initiatives from my vantage point that we have comprehended and are in some level of execution on. The first is probably the most obvious one to eliminate supply constraints. So our story and our numbers would be somewhat different obviously if we were not constrained by capacity. The second is to raise the gross margin and lower the OpEx such that the modality of the gross margins is not as wide as it is today. I tried to enumerate those site consolidation, contract manufacturing, dependency [ph] increase and just minimizing the swings. So that's sort of a mix and just basically pulling out some of the overheads at the [ph] company as mix shifts. The third is to drive greater utilization and be more cognizant of managing backlog as you maximize the utilization through each quarter. In general, this is such a book and ship business, the disciplines of managing the utilization of the facility is less well developed than you might guess. The fourth is to improve the mix, as I mentioned, in CommTest, moving to a greater mix of lab and production, which, as I mentioned, that was our fastest growing piece. That will help over time as well as services. The fifth is to improve the execution precision, two things, the Oracle and IT visibility and hubbing. Today, some times to figure out where we are in rev rec or bookings, it just takes too long because some of the pieces of the company that not fully integrated it takes a little bit longer to make discussions on. And then lastly is that it certainly would help if all markets were flat to up rather than some being snorky such as... so a little bit of help from wind at our back. So those are the six areas that will improve predictability. Hope they help. Jeff Evenson - Sanford Bernstein: I am wondering on your decreasing this... or eliminating supply constraints and increasing utilization seem on the surface to me potentially mutually exclusive. Kevin Kennedy - President and Chief Executive Officer: Well the problem is is that if you have supply constraints, you often have pieces of the process sitting there and waiting. So the more that you can ship you're not absorbing the revenue in the quarter and in fact you've got people and processes and equipment just sitting there for downtime. So you almost get a double negative in terms of the absorption. Okay?

Your next question come from the line of Ajit Pai of Thomas Weisel Partners. You may proceed. Ajit Pai - Thomas Weisel Partners: Yeah. Good afternoon. Kevin Kennedy - President and Chief Executive Officer: Hi Ajit. Ajit Pai - Thomas Weisel Partners: Couple of quick questions. I think the first one is just a dressing on the margin side. What's happening in the pricing environment both in your Communications Test and Measurement business as well as your Communication Products business, the Optical business?

In the T&M, we don't see much of an ASP effect other than what we'll see is a maybe a deal specific activity that we win and then it's more mix, right? Somebody get the deal with the certain mix and if we have our weighting towards mix, that's really more of what we see in the T&M area. In the Optical Comms, we've been running in the 2 to 4% range for a very long time. In this last quarter; we're at the higher end of that range. Ajit Pai - Thomas Weisel Partners: Got it. So then what... when you look at your business mix right now, and the fastest growing business that you have is your Communication Products business and that has the lowest margins. So if that continues to be the fastest growing business, unless you feel otherwise, I think you indicated that that will be the fastest growing business. What would get that gross margin up to the range that you're increasing your target to? David Vellequette - Chief Financial Officer: Well, there is a couple of things. One, we're working on the margins as we said in all the groups. Two, we did note that the CommTest market, we need to get the CommTest business up to 45% of the revenue mix and we believe there is... we can get some margin leverage in that area. Also we're looking in fact at, looking to engage in more at the CMs in that area. So those are the areas that are... one we have to... the mix has to change as you noted that have more CommTest in it than it recently did and all areas we are working on improving the margins. Kevin Kennedy - President and Chief Executive Officer: Ajit, let me make sure I am clear. I think both the Optical Components market and CommTest market are capable of growing 5 to 15% per year. We've demonstrated that. In fact if you look over the last three years, you'll find out that we have one year where the CommTest market grew faster than Optical Comps. Secondly, the notion of the mix favoring CommTest is I think here to stay, so I think we will continue to see it in the 40s and over time continue to migrate to the 40s. And then third, in every business there is gross margin improvement. And basically the notion of leveraging more contract manufacturing is basically the notion of sharing unemployed overhead within industry rather than within yourself. And so we... there is plenty of opportunity within the company for that. Hope that helps.

Your next question come from the line of Paul Bonenfant of Morgan Keegan. You may proceed. Paul Bonenfant - Morgan Keegan: Hi, thank you. Actually I have a two part question. First, as you mentioned that 40G was helping CommTest, and I'm wondering if it's also helping your Op Comp segment specifically through the Menterra [ph] relationship. And the second part of the question is more philosophical in nature I guess, when we have this discussion next quarter given the consolidation that's going on in the Optical space, it looks like JDSU which has been holding the top spot for the Optical Components market for the last eight years or so, will hold the number two spot behind the merged Finisar-Optium and Opnext and StrataLight will be nipping at your heels. And I am wondering if you think this is a... if you ventured a true era of consolidation here, or maybe these are opportunistic grabs and if perhaps they let you to reconsider or change of strategy with regard to M&A in the optical space? Thank you. Kevin Kennedy - President and Chief Executive Officer: Yeah, I'd try and take it. In terms of 40-Gig it absolutely helps the entire company. I'd say the greatest benefit to us is... it's been a great growth driver for the testers as you know carriers tend to drive out new services and access methods in wave and so that was a wave for CommTest. Second is on Optical Components, we have at the transport layer and the IP photonic layers, things like modulators we sell almost independent of speed. And so 40-Gig just is another new speed that requires ROADMs, new modulator so forth and so on. And so that has been very positive for our Optical Comms. And as it relates to Menterra [ph], I also good, the benefit, I think we have helped the Menterra [ph] relationship become more and more relevant to the industry. So that's a positive. And we've also positioned some of our tunable technology as a recipient of future business with Menterra [ph] as well. So I think there is sort of three levels of positive on that. Relative to industry consolidation and size, let me share with you our thoughts. Number one, in general, we would observe that making money in optics is as much about what you chose not to do as what you chose to do. And so we have chosen where we have decided to play in order to make sure that we continue to improve our profitability and make money. So being number one or two or three is less important than being excellent at what we do and being profitable at what we do. The second question regards to the trend towards consolidation. And I would observe for you that whether you call it consolidation or diversification, most of the asset combinations that have occurred have occurred primarily over the last 12 months in the transmission segment. So whether it was JDSU and Picolight, EMCORE and Intel assets uplink in OCP, Optium and Finisar and so forth, you are correct that there has been a dramatic combination... set of combinations in the transmission segment versus transport for... versus the photonics layer. So we have participated in it. We got a vixel position out of it, which is a leadership position. Do we wish to perpetuate or do further combinations within the transmission segment? Certainly not at this time. So we are going to continue to build our portfolio where we think we can make money. But if you are specifically asking me will we add one more foot to the transmission combinations, we already participated once early in the cycle, not inclined to do that at the moment. I hope that helps.

Your next question comes from the line of Sam Dubinsky of Oppenheimer. You may proceed. Sam Dubinsky - Oppenheimer: Hey guys. So it seems like a muted service provider spending environment is impacting the test business a little bit. And so I guess my question is it seems like telecom demand on optics, component side is holding up pretty strong. Is there any chance that we are seeing double ordering as you guys are currently capacity constrained? And then I have a follow-up question. Kevin Kennedy - President and Chief Executive Officer: Yeah, let me take both of them. I think there is a... if you were to think about three forms of the market, and I am referring now to your... the way that you phrased the question around the test and measurement piece... one where you've got the wind at your back and every customer that you have is buying more every quarter. We are clearly not in that particular spot. The other is where every customer is running for the hill, and we are nowhere near that. So we're in the middle of this where there is a balance. The positive has been the bigger players have been buying more than at a faster pace than the smaller, more cautionary people have been cautious with their spend. Could that shift slightly, could... or could it impact the company in terms of lumpiness if there was a wrong... if their positioned well with the wrong guy at the wrong time? Absolutely. So we do see that this is not wind at your back across all fronts. But it's been an okay environment for us. Hence we grew 15% year-over-year when you take out the cable industry. On the Optical Comm side, it has been good. Is it possible there is double ordering? It could be. I am not aware of any. In general, there is enough differences in the specsmanship of these new devices, whether they are ROADMs or tunables that the actual operating characteristics when they are in the network equipment manufacturers product can be quite different. And there is a lot of testing and Telcordia certifications that go around those. So I would say that it's a little bit less likely with these new areas, but this wouldn't be the first time that I am surprised by something. Hope that helps. Sam Dubinsky - Oppenheimer: Okay. Yeah, that helps. And just one last question. When you guys are targeting sort of... it seems like growth is coming from outside North America. I know that North America is generally slow. Is any of that growth related to or impacted by a soft U.S. dollar? If the dollar were to rebound, does pricing have to change for you guys to spur demand in other regions? How should we think about currency going forward and how that impacts your business? Kevin Kennedy - President and Chief Executive Officer: Yeah, we do have a portfolio of currencies that we do business with. So we haven't seen a dramatic increase in revenue or decrease in revenue as the dollar shifted around. It was favorable as the euro got significantly stronger very quickly that was obviously a favorable impact for us because we were selling the equipment in euros. And right now, I know the euro has come back. But the effect is pretty small; not very significant, less than a percent. Sam Dubinsky - Oppenheimer: Okay, thanks guys. I appreciate it.

And your next question comes from the line of Todd Koffman with Raymond James. You may proceed. Todd Koffman - Raymond James: Thank you very much. Most of the telco carrier and systems vendors have actually been quite cautious with their spending. But the-- Kevin Kennedy - President and Chief Executive Officer: Todd? Michelle Levine - Investor Relations: Hello? Todd Koffman - Raymond James: This is Todd and this withdraws from the call. Kevin Kennedy - President and Chief Executive Officer: He's dropped. Todd dropped from the call. Is there any other person in the queue?

And you have no more questions at this time. Michelle Levine - Investor Relations: This concludes our call. Thank you for joining us.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.