Good afternoon. My name is [Stephanie] and I will be the conference operator today. At this time I'd like to welcome everyone to the first quarter earnings release conference call. (Operator Instructions) At this time I'd like to turn the call over to John Oberle. Sir, you may begin the conference.

Good afternoon and thank you for joining us on the call. Bob Switz, ADC's Chairman, President and CEO, and Jim Mathews, ADC's CFO, are with me today. Before we start I would like to remind you that today's conference call contains forward-looking statements and that future events and results could differ materially from the forward-looking statements made today. actual results may be affected by many important factors, including risks and uncertainties identified in our earnings release and in the risk factors included in Item 1A of ADC's annual report on Form 10-K for the fiscal year ended October 31, 2008 and as may be updated in Item 1A of ADC's subsequent reports on Form 10-Q or other reports filed with the SEC. This earnings release can be accessed at the Investor Relations section of ADC's website at www.ADC.com. ADC's comments will be on a continuing operations and GAAP basis. As previously announced, our Professional Services business in EMEA is classified discontinued operations. The results referenced on this call and any guidance is exclusive of the EMEA division of the Professional Services business unit. Bob will provide an update on ADC's business developments and highlights. He will then turn the call over to Jim, who will cover the financial results and provide forward-looking financial guidance for our second quarter of fiscal year 2009. I will now turn the call over to ADC's Chairman and CEO, Bob Switz. Bob?

Well, thank you, John, and welcome, everybody, to today's call. And from observing our attendance roll, I can see that we're actually having a call today, so I'm very pleased. First, I want to start today's call by thanking all of the ADC employees and management for their speed and agility in adapting to this ever-changing dynamic market that we find ourselves operating in. First, economic and market conditions are clearly challenging. We all know that. I think the good news from my perspective is that this is essentially the same management team and same group of people that guided ADC through the 2001 tech collapse. So I'll begin today's commentary by discussing our performance in the context of the extraordinary economic environment facing most companies worldwide. Based on our performance in the first quarter, there's no question that, like many companies in our industry, ADC is being significantly affected by the global recession. While we expected a significant year-over-year decrease in our first quarter business, the decrease happened to a larger degree and developed faster than we had expected. As a result, we made additional adjustments to our expense structure, aligning it with the new level of business. We are primarily a book and ship business and therefore we don't always have the benefit of significant backlog and inventories to temper the ebbs and flows of business. However, as we did in 2001, we will manage prudently through these challenging times with the goal of emerging as a stronger company. Let me cover some thoughts on what we'll be doing in this regard. Perhaps most importantly in this environment, ADC is committed to maintaining our very strong cash position. We continue to take action to ensure our expenses are in line with the current business demand, with a goal…

Thanks, Bob, and good afternoon to everyone. I'm going to begin with an overview of our Q1 operating results, focusing first on the most significant items, and then I'll provide some additional color on these. Number one, our first quarter sales of $254 million was a decline of 23% year-over-year and sales were down 28% from the fourth quarter of 2008. In addition to the challenges of the global recession, foreign exchange rate fluctuations contributed approximately $16 million or about 5 percentage points of this year-over-year decline. Adjusted gross margins were 30.9%. This compared to adjusted gross margins of 31.5% in the fourth quarter and 36.6% in last year's first quarter. Operating costs in the first quarter were approximately $505 million. That includes the goodwill and other intangible asset impairment charge that we recorded of $414 million plus $8.3 million of purchased intangible amortization and a small amount of restructuring costs. On an adjusted basis, therefore, our operating expenses were approximately $83 million, which decreased from both last year and from our fourth quarter of fiscal 2008. GAAP diluted earnings per share was a loss of $4.45. This included $4.38 per share of charges mostly related to our writedown of goodwill and other intangibles, but also included certain other charges that I will detail later. Total cash used by operating activities from continuing operations was $15 million during the quarter. The decrease in cash from continuing operations was primarily due to our payment of previously accrued 2008 incentives. Reviewing consolidated earnings in a bit more detail, as I noted, our GAAP diluted earnings per share from continuing operations was $4.45, but this included $4.38 of certain expenses. These were including $4.12 for goodwill and other intangible impairments, $0.14 per share for auction rate securities impairment, $0.08 of purchased intangibles amortization,…

(Operator Instructions) Your first question comes from Amir Rozwadowski - Barclays Capital.

Bob, if we look at sort of discussions that you're having with carriers these days versus, say, in the beginning of the year, certainly your guidance seems to imply sequential uptick in sales. How shall we consider the tenor of those conversations right now? Are they giving you a little bit more color in terms of how they plan on allocating their capital through the course of the year or are they still sort of holding those plans closely in?

I think it's always difficult to generalize - we have lots of customers - but I would say in general the discussions are relatively favorable regarding spending. I think the differences are that customers, particularly larger customers, are managing their inventories much more closely and managing their procurement much more closely with signaling that we ought not to expect the classic spikes that we've had in the second quarter spend; as things progress through the year we ought to be thinking more linearly about procurement. And clearly there's discussions, like discussions that are obviously being had in any business, about how much capital to spend, but at this point most of the discussions I would put in the category of relatively favorable in terms of what I would say full-year 2009 operations and the potential for increased spend over subsequent quarters. So I would characterize in general the tone as relatively good, but also caveat that by saying we are in the midst of some of the worst global economic conditions most of us have probably seen. There's many months in the remainder of the year. But I would say discussions up to this point have been relatively good given the fact that we expect most carriers to cut back by some degree. But I think the pattern - for me, I think it's the pattern I'm most focused on. So if I were to assume and accept the conversations as reflective of future results, it would suggest that my first quarter's my low water mark, I think. So if that's the case, which I think it probably is, then that's good news.

And then you'd mentioned additional field trials in EMEA and Asia-Pacific on the FTTX side. Can you give us a little bit of color, you know, if those trials progress the way you hope they would when those could start to contribute to your sales?

I think I've said this maybe in prior calls. I think whatever goes on this year really becomes more meaningful next year. I think I held that position even prior to the onslaught of the global economic headwinds. I think this year we are going to see an increase in trialing. There could be some shipments late in the year and I would say that's probably going to be more calendar than fiscal. But for the most part I think what goes on this year is going to be reflective of what we can expect in terms of real revenues next year.

So the way we should probably interpret it is that there hasn't really been a change in terms of some of that traction for you folks versus your plan?

Yes, I think that's fair. The change would be, again, seeing more serious interest, seeing trials, maybe moving from discussions to a trial so the direction is clearly favorable. I think the revenue, any meaningful revenue, I think would be a 2010 event.

Your next question comes from George Notter - Jefferies & Co.

I want to ask a question about the balance sheet. Do you guys have any new thoughts there? Obviously you bought about $150 million worth of equity back across the October and January quarters. The line of credit is now gone. I know that was an inhibitor to continuing these sorts of buybacks, either equity or debt. Maybe you could update your thoughts there.

Yes. You know, I think, George, clearly we feel very good about the previous buyback that we completed successfully. And even though the current circumstances, we don't regret that at all. In terms of going forward, I would say that things that fall into the classification of financial transactions, whether that's buying shares or doing something with our outstanding debt, are things that we constantly review; we put it into the basket of total liquidity and total cash allocation concerns. So we balance that with liquidity, needs to invest in the business, etc. It's not something that we ignore, and I think as you've seen in the past we did take some action with the first buyback. So I'm not sending any signal about what we might or might not do, but I can say the economic value of those potential transactions is not lost on us.

And then I guess a corollary to that, any thoughts on cash usage or generation this year? I think you guys had previously expected to be at least cash breakeven or better this year. Is that still the thought now?

Our current outlook - and I'll let Jim add more to this if he chooses - our current outlook is that we will be cash positive for the year. At this point in time we don't see anything that places an unusual demand on our cash. Opportunities tend to come up from time to time to grow and build our business and we'll evaluate those on their merit as they present themselves. But at this point in time we see ourselves as being a generator of cash this year. Jim, do you have anything to add?

Yes. I would say, on a free cash flow basis, we obviously are managing our capital expenditures very carefully, but our aim and expectation is to be free cash flow positive. You know, we burned a little bit of cash in the first quarter, but that's the norm with the incentive payments that we referenced. Absent that, we actually would have been free cash flow positive in Q1 as well.

Your next question comes from Paul Silverstein - Credit Suisse.

Jim, first off, just a couple of things since you raised it. Those incentive payments you just referenced, are those out of the ordinary? Isn't that normal course?

Yes, absolutely. But I'm just explaining why we burn a little cash in the first quarter.

Next question, Bob, in terms of visibility, going back to your previous comments, is there any quantification you could give us or some metrics? I trust, notwithstanding your previous comments, that visibility today is not that much better than it was 30 days ago, 90 days ago. Is it in fact worse? Is it marginally better? Is it improving?

Boy, you know, I can't say that it's improving in a quantifiable way, okay? So I'd say we're where we normally are, which is not good visibility. We're book and ship. A lot of our insight comes from discussions with our customers that we try to interpret in terms of providing an outlook and so forth. So I would say the answer to your question is no, visibility is not good. There are some customers that have not yet finalized on their capital budgets and are operating without budgets, so we don't have anything quantitative to go on from those customers. What I can say, as I said earlier, is we've had encouraging dialogue. Now I've been around awhile and I didn't just fall off the potato truck, okay? I know that talk is talk. But, quite frankly, it is one of the things that we have had the benefit of now for a period of time and so far the guidance that we've received from our customers seems to be materializing. Beyond that, I don't have too much more than what I normally do other than our outlook; we have a pipeline of known potential business that we handicap and so forth. But as far as real orders that we can put in the bank that would give us heightened visibility, no, we don't have that.

And, Bob, your comments about encouraging dialogue. Is that dialogue meaningfully more encouraging than it was 90 days ago?

Yes, I would say probably so. It's been an ongoing dialogue that has remained consistent at various customers and various levels of those customers.

Can you give us any insight - particularly with Verizon, given how important Verizon's been historically, especially in your April quarter with the project FiOS roll out - any incremental insight you could offer in terms of what you're expecting, what they're communicating to you?

Well, at this point what they've communicated is that they plan to pass their 18 million homes. They are very focused on their rollouts in New York, the MDU rollout. They have indicated that they're going to manage their inventories more tightly and more effectively, and I think clearly we've seen that. I have no reason to believe yet that they're going to change their commitment to FiOS. I think it's entirely possible over the course of the year to see some shift in where they spend their money on FiOS, clearly moving from the single dwelling unit to the multi. That's okay with us because we are a key supplier of MDUs. They could shift some spend towards homes connected and building market share for the areas that they deploy, and that could change some aspect of where their spend goes. But beyond that, they haven't really suggested quantitatively to us in a meaningful way that they're going to change what they've been doing. But I think if we want to speculate, certainly they could shift around a bit and try to capitalize on customer gain during this period. But, again, we don't know anything at this point other than they've communicated more tightly controlled inventory and procurement. We're seeing that. And they said that they're going to pass 18 million homes.

Are you involved with BT given the announcement this morning?

We have some involvement with BT, but I wouldn't read anything into that announcement for us. Oh and one other thing, Paul, on the visibility as I think about it. I think one of the things as we look out over the year and if we look at our first quarter, when I look at the rates of decline in business across the entire customer base, if I look at our top 20, one of the things that I believe is going on and might eventually call for some recovery is I do think across the board inventories are being wound down pretty significantly in our distributors and I think in our customers. I think people are trying to work off inventories. And I think at some point we should see the other side of that. I can't predict when, but the rates of decline suggest to me that a lot of spending is not being made and/or deferred and inventory's being worked down.

Your next question comes from Steven O'Brien - J.P. Morgan.

On the gross margins, can you help quantify a little bit more, Jim, maybe the benefit from raw materials and transportation costs? If we look at just a slight 60 basis point decline from last quarter, what was the downward pressure from the lower top line versus the upward benefit from those two items? And then when you look at your current restructuring efforts, could you get back gross margins to the low to mid 30s given the revenue outlook going into Q2 and the remainder of the year?

Steve, let me answer the last one first because our Q2 revenue gross margin guidance is around 32%, so we are seeing some uplift there, and I would say to a large extent that does reflect both somewhat increasing volumes but more particularly the cost saving efforts that we've applied. The way you asked the question is maybe a little different from how I'll answer it, but maybe this will be some good color. If you think about the fourth quarter decline in margins of 60 basis points in the first quarter, just the pure deleveraging of the revenue - it basically was $100 million in revenue - if you just take the effect of that in terms of deleveraging, that's going to take you down probably 3.5 percentage points, okay? And so the fact that we're only down 60 basis points says we basically got 3% of that back. I would attribute a little bit of that to getting some of the commodity costs wiped through the supply chain, but the vast majority of it I would attribute to the cost-cutting efforts that we made. We took about $10 million in costs out of fixed factory just between Q4 and Q1, and so that's really where most of our ability to maintain that margin despite the drop in revenue came from.

What's the headcount in Q1 versus Q4 and how much of that was reflected in that $10 million?

Well, I probably can't break it down in terms of exactly headcount to those dollars. I will tell you that we've taken two sets of restructuring actions, some of which you haven't seen in any numbers yet because we just did them at the beginning of February. But during the quarter we took a number of actions in our factory in Mexico, where we have a fair amount of leeway to move that work force up and down in response to changing demand. If you actually include the early February actions, from the end of last year to what will now be implemented including our early February actions, our total headcount would be down about 1,000, and 600 of that occurred in the first quarter and another 400 has already been announced for the second quarter.

So would those actions hypothetically, if Q3 is sort of its normal flattish with Q2, do you expect that gross margin would therefore increase further?

We could get some additional uplift. Again, a lot of that's going to depend on the revenue outlook and one of the reasons we're not giving guidance is because of this lack of visibility. If you look at how these things phase in, most of the early Q1 actions that we took actually began to see their effect in December, so we sort of got two of the three months' benefit out of that, so now that's built into the run rate. The February actions that we took we'll build in through Q2, and so they should be fully effective by the beginning of Q3. Our estimate is that we will have taken, between cost of goods and OPEX, by the end of the second quarter we will have taken out somewhere between $13 and $15 million in total cost per quarter.

China and the Middle East seemed to come in pretty healthy for ADC this quarter. Those economies or those geographies are having their own troubles. Do you think that that demand level can remain consistent or continue to be a strong point for ADC going forward? And then on a different topic, have you had any conversations with your customers about broadband stimulus?

We haven't had direct discussions - I shouldn't say that; I'm sure people in my sales organization have had some discussions around the broadband stimulus - but I think just at a high level we do think there's some opportunity for us in that, particularly with the initiative around rural broadband, so I think that's an area that could turn out positive for us. Historically we have worked with municipalities and others to deploy broadband solutions in rural areas, so I think with availability of some funding and capital that's a scenario that we could benefit from. Also, to your question on Middle East and China, I think the potential for the Middle East for us is there. It's really hard to say going forward because I do know that there are troubles in parts of the Middle East. Some of that will depend on a project-by-project win basis. We're not that big in the Middle East, so it's conceivable we could grow our business off the current base even in the tough environment. China represents a different issue. I think in China we're seeing the benefit from some of their stimulus and the government program to spend in support about $41 billion on deployment of wireless solutions in China. And I think, again, our Century Man business is seeing some of that benefit today. And I think you may have heard on another conference call or two people that are focused particularly on the wireless side in China are quite bullish about their prospects in China this year. I would say from an ADC perspective, given the base we have there and the footprint that we are now establishing with Century Man, I would expect our year in China to show significant growth for that part of our business.

Did you give your 10% customers?

You know, I didn't do that, but I can tell you it's the usual suspects - AT&T and Verizon, obviously, vie for the number one, number two spot; and then after that there's a number of people, Sprint and Ericsson, Qwest, BT just to name a few. But clearly the two largest customers remain AT&T and Verizon.

Are you not giving precise figures?

You want to know how much?

Yes, what percent.

Oh, sure. Yeah. In the quarter AT&T as a percent it was about 18.5%, and Verizon was a little over 17%.

Your next question comes from Christian Schwab - Craig-Hallum Capital.

Bob, just regarding visibility on a go forward year and given the tremendous inventory wind down, looking back historically you've always kind of grown with the CapEx of the two largest customers that you've mentioned; as a matter of fact, you've grown a little bit more than what their CapEx growth is. And the most aggressive call out of AT&T is that CapEx would be down 15% on a year-over-year basis, and we've already started the year obviously significantly less than that. Is there any reason to assume that should AT&T's CapEx come in down 10% to 15% and Verizon's come down 10% that you would materially decline worse than that on a year-over-year basis?

We would decline greater than their CapEx?

Yes, materially greater than their CapEx guidance. Is there any reason that that would occur?

I'm not sure that I could say that there is. I mean, it's possible, of course. Right now AT&T hasn't even released their budget. But off the top of my head I couldn't isolate a variable that would say yes, we're going to get punished more.

So at some point if AT&T only says that CapEx is going to decline 15%, Verizon will say some number less than that from our checks, then there should be at some point to your answer on visibility earlier, there should be some material snapback some time this year?

That's a reasonable thesis. And I think that also plays to a comment I made earlier about depletion of current inventories and tight control over procurement. So I would say in general I would support your thesis.

What would you, with your debt trading at $0.50 or less on the dollar, what type of visibility would you have to see go - especially in the situation where you're not going to burn cash and you probably, from my checks, probably will need about $250 million internally to run your organization on a global basis - that leaves an opportunity to do something material, repurchase of that debt. What would you guys have to see in your business to give you the confidence to go out and take advantage of that discount?

You know, I think it's not so much what we'd have to see in our business. Certainly I think one of the things that would give us encouragement overall is knowing that our trajectory is sequentially up over the remainder of the year. That would be certainly heartening to us all. I think the other is more of a use of capital consideration and while buying back today's debt is a very good financial transaction, it doesn't do a lot for establishing additional growth opportunities and competitiveness for the company going forward. So while it's appealing now as a financial transaction, the other thing we have to weigh is the long term and make sure that we're making the appropriate investments to make sure our leadership in fiber and our global initiatives and in our wireless business are maintained through proper investment in that business. So it's not so much the outlook, although that's part of it. It's really what do we need to do to assure in a consolidating environment that ADC has sufficient means to extend the growth of our business and to build a bigger base in the areas that we've invested for growth, recognizing that we have some legacy parts of our business that we have to offset.

Your next question comes from Kenneth Muth - Robert W. Baird & Co., Inc.

First, could you just give us kind of your sense of what you're seeing in the commodities markets and how that might be impacting any of your business right now from a pricing perspective?

Right now we're not seeing a big impact. As I mentioned earlier, the higher commodity prices that we saw, particularly last spring and summer, have pretty much worked their way through the system. To the extent that we will see an increase in something like copper, which is, you know, probably the one that affects us the most, that's pretty much on a pass-through basis. We'll see some pressure as that works its way into and then out of our inventory. Beyond that we're not expecting anything on the horizon that we would see putting pressure there.

And then just on the enterprise side, quite a rapid drop off sequentially there. Would you see that area one of your fastest rebounding segments in the second half of this year?

In enterprise?

Yes.

You know, that's a possibility. I'd say we've made pretty good progress in capturing data center opportunities, and so to the extent that that part of the enterprise market is alive and well in the balance of the year, I think we can see our way clear to winning our fair share of those. But in general across the board, general enterprise funding, I think, not only for us but for a lot of our peers has been off quite dramatically. I think it's also fair to say that we have not experienced, I don't think, the same rate of decline in our enterprise business that some others have had. But to say that it's going to have a significant rebound, I think it's a little too early to tell, but I certainly would hold that out as a possibility.

And then as you look at the carriers in the second half of this year, how do you see maybe a revenue shift going on? Would that benefit how they're spending now and may spend in the second half of this year? Because you guys had some makeshift issues in the past of central office versus more of the edge of the network. Could you just help us through what you might experience there?

I think in general that pattern has remained true. This year I think it's a little hard to discern because of the close management of procurement activities and the utilization of inventory. I think it's part of their deployment cycle, so my guess is that's not going to change. I think the way we're being impacted by the control over spending is more the issue, so I would say over time that pattern will remain true; it just seems to be how they procure and deploy. But I think right now it may be matched by the financial control and inventory management activities.

If you get to kind of the high end of your guided range in fiscal Q2, where would you kind of see that upside coming from, the copper or the fiber segments?

Copper's always a wild card and it's hard to predict, so we could get a contribution from copper. I would say fiber will certainly contribute, both as core and in terms of fiber-to-the-prem. I think our in-building wireless solutions will also make a contribution. Globally, as I mentioned earlier, China's doing well, so I think from a geographical perspective Asia-Pac is probably going to contribute as well.

Your next question comes from Nikos Theodosopoulos - UBS.

Just a couple of quick number questions and then a follow up on this use of cash. So do you have some actual estimates for 2009 on CapEx and cash restructuring?

As far as cash restructuring, we don't see a lot of significant numbers there. Most of that we saw in the first quarter; I think in this next quarter there may be a couple of million dollars - $3 million, I'm told, in the second quarter. Beyond that we're really not expecting at this time additional restructuring charges. Obviously, we react as the business requires us to. As far as CapEx, I guess I don't want to give specific guidance other than to say that we're being very aggressive in making sure that any capital expenditures are short payback and absolutely critical. And maybe I'll just characterize it as saying, you know, I would expect CapEx maybe to be down 20% from last year, something like that.

And Bob, did I understand the answer to the question that you gave regarding repurchasing converts? What I heard you say there - and please clarify - is that you felt it was a better use to invest in growth and acquire for growth rather than buy the converts at 50% below par value or less if you had visibility that revenues were growing and you were cash flow positive. Is that your perspective?

I didn't quite say it that way. What I did say was as a financial return it's very clear that that's a high financial return on a pure economic basis if you buyback the shares. What I was saying was it's more of a balance over time in terms of how we use our cash because at the end of the day, if we get a great economic return, it's a nice return but it's not growing our business for the long term. And the reward that I would get for that in the short term I probably wouldn't get in the long term because people want to see the business grow and know that we have the opportunity for both top and bottom line growth. And so it's really a balance between those two and with limited resources at this point, it's something that I would say we don't want to rush into and do prematurely. We continue to evaluate it, and we know that it has great financial returns. But again, part of my job and I would say most of it is to make sure that we have good long-term growth prospects. And recognizing the challenge in our industry of maintaining that in this type of an environment, we just want to be patient and take our time and be careful on our use of capital.

So do you think that if I look at the cash under the scenario where business is improving the float may not be that great, but let's say the business is improving and you're cash flow positive  would you say that as the management team you would look to more likely take advantage of reduced company values and acquire for growth rather than look to improve the capital structure?

You know, I think both need to be considered. We could be in a situation where we don't see in the foreseeable timeframe opportunities to grow the business, which might cause us to reflect more strongly on using some of that capital for cap structure purposes. On the other hand, there are some things that could happen in the business that might generate cash that we're not expecting today and we might choose to use that cash as an enhancement to cap structure. What I'm saying is we're very open minded and we recognize one of the values of buying back some of the bonds, but we also have a much broader set of considerations to worry about as well.

What would be Plan B if sales just stay at these levels for a few quarters? Do you look to reduce headcount or cut salaries? It would seem to me a priority is getting to cash flow positive. What would you do if [sales] stay flat?

I'm not going to go into specific detail for a lot of reasons, but what I can tell you, Nikos, is we have a Plan B. There are triggers that we can pull that would clearly preserve cash and allow us to be cash positive if we thought it was in the best interest of the company to do that. So we are sitting here with a Plan B and triggers that we can pull if our outlook for the year changes significantly from where it is today.

Your next question comes from Simon Leopold - Morgan, Keegan & Company, Inc.

I wanted to see if we could touch on another one of your big customers. You did talk about Verizon and FiOS. I'd like to see if you could talk about AT&T and specifically the activity that might be going on within AT&T as it prepares for a possible strike as well as your thoughts on the prospects for a strike and what your role might be in that event? And then longer term with AT&T, their decision recently - or now more than a month ago, I guess  to push out U-Verse program. If you could talk about what impact that might have on your business and what that's implying within your forecast for the April quarter and thoughts beyond that.

Sure. And if I don't remember all your questions, tweak me and I'll answer them. First on U-Verse, the good news and the bad news around U-Verse is that we're not really affected by that push out and one of the reasons is that we won the FTTP portion of the UVerse build, and that was mainly centered on greenfield activity and I think as we all know, there's very little greenfield activity - the real estate market's in the dump, subdivisions are not being built, subdivisions are not being occupied. And so the need to deploy broadband to those subdivisions is not necessary. Last year I could say we did very little revenue with AT&T around U-Verse. So there's no negative to our plan relative to that U-Verse pullout simply because of the part of the architecture for that rollout that we were participating in. In terms of the strike, certainly they've been preparing for a long time. My personal belief  and it's strictly personal - I think the chance of a strike or a prolonged strike is probably getting less. I'm not sure this is the type of environment anybody with any wisdom wants to go out on strike in. And so I think there are pressures building that might cause the parties to come to an agreement where maybe a year ago that was less probable. So I'm guessing that there might not be a strike. I don't think anybody really knows for sure, but we'll see. In terms of our role, that's also variable. We have the capabilities to assist in the running of the network, obviously, through our Service business, and we certainly have been working with AT&T over the past year as part of their preparations for those activities. So we could be a beneficiary under certain circumstances. There are complications that go with providing that sort of assistance during a strike and we'd have to evaluate that. But right now it's certainly possible if there were a strike we could get some additional work. I personally think the chances of a strike or an extended strike are lower than what they were.

Just to follow up - thanks for the clarification, but to follow up on the answer regarding the UVerse pushout - I'm just wondering if that suggests that you've got a greater exposure to AT&T's legacy type businesses? I'm really trying to get an understanding of such a big customer how their cut in CapEx might affect you. Am I drawing the wrong conclusion now?

Partially, I think. We've been very successful helping AT&T with various of their rollouts, their ultra-available network. We supply them with central office, with core fiber solutions. And, of course, we provide them with a lot of services - network maintenance, installation, planning, etc. So it's hard for me to say that we're going to be disproportionately affected because of UVerse. We had business last year when there was no U-Verse and we had respectable business with them. Certainly it was down, mainly due to Bell South's portion of AT&T. In the legacy portion, our revenues were up last year. I don't have those statistics right in front of me today so I can't relate on the same basis. But I don't think we should draw the conclusion that if they pull back on U-Verse that the balance of the business that we traditionally do with them would be negatively impacted.

If you could touch on some of the linearity issues that many have talked about, where it sounded like basically for you January was very dead. I'd like to get an understanding of what the pattern has looked like going through the month of February and how you're thinking about linearity in the April quarter.

Yes. Off the top of my head, February feels like January more or less, so I don't think there's been a huge change, nor were we expecting huge change. We expect the AT&T budget issue to be resolved soon, and then managers inside that company will know what they have available to spend and where it's been allocated to be spent. We also - again, this is speculation - but given what I said earlier about the containment, the management of inventories across the board, even at our distributors as well as customers, at some point there's the other side of that conservatism, where purchases have to be made to replenish within a reasonable degree stocks at both distributors as well as in customer inventories. So I think we'll see - my guess would be a pickup in business is likely, at least in my way of thinking, if we're going to see it we'll probably start seeing it in the April period.

Your last question comes from Andrew Watts - Oaktree Capital.

I'm having trouble reconciling your statement about your equity buybacks and your kind of not really going forward with buying debt. You bought back stock at roughly $7 a share on average; you're paying 2.5 times book. But you're not willing to buyback debt at $0.50 book. I'm just wondering - it seems to me like you have a good opportunity to help your balance sheet here, kind of repair the damage you did with the buyback. Obviously, you need to husband some cash for whatever you need, but eventually you've got to pay this debt back. What's your thinking there.

Yes, well, first of all, we're not opposed - I think I said that earlier - and I think we can look back and look at the share repurchase and Monday morning quarterback that all we want, but we did think that was a wise thing to do at the time and we did it. Right now the issue really is, as I've stated, which is taking the time to contemplate the use of capital. Repaying debt is not lost on me or the management team. We think we have ample time to repay that debt - the first maturity is 2013 - and we haven't said that we would not do a convert repurchase. What we said is we're considering all of our options in light of what we think is the best combination of things to do for the business. And certainly relieving ourselves of some debt today would be good. Also I would say building the business to make sure we have sustained growth for the future is also good. And we're in very uncertain times, so you also want to make sure that your liquidity is adequate to do what you need. And I think looking at the change that's occurred in the world in simply the last 45 days, I think it's been proven that things are quite unpredictable and what people thought was low goes lower and what people thought might have been the end of a significant problem in the financial community got bigger. So we're not opposed to doing it. It's in the mix with a number of other things that we have to consider.

But let's kind of - well, you can throw out the fourth quarter, look at the first quarter buyback. I mean, you're buying it at more than two times tangible book when the bonds are trading at half times tangible book.

I'm not arguing with your math. I understand the math very well, but the issue is not one of us not recognizing a good return on investment. It's more the three or four things that I mentioned earlier, which is consideration of all the needs for capital in an uncertain environment, of which one of those considerations is the possible purchase of some of that convert.

Understood. But you spent $94 million on the stock at $6.30 and that's 2.3 times tangible book, and the bonds were at that time trading and still are trading around $0.50. I just don't understand.

I don't know what else I can tell you. That was the decision we made. We thought that was a good decision. There were a number of our investors that thought that was a good decision; there's probably some that didn't. But I think we made the best decision at the time, one that we thought was appropriate, and we'll try to do the same thing as we consider the variables around what we do next.

If you'd bought back bonds, your tangible book would be over $5 right now and instead it's at $2.70, which is where the stock is trading. So I think the shareholders should be really more cognizant of that kind of situation. And you guys are certainly not alone, but this repurchase of equity has just been a horrible, horrible plague on our markets speaking from my perspective. I think its something people really need to start to - it's an Emperor has no clothes situation to me. I think people really need to start to look at that. And I don't mean to jump on you guys in particular, it's just you're the one who happened to have the call today that I noticed.

Well, thank you for joining our call.

But I would really encourage you revisit the whole concept of equity repurchases, particularly at significant premiums to tangible book. They've just been huge wealth destroyers and, if you have the opportunity on the debt side, you can really create a lot of value there. That's just my $0.02 worth and I appreciate the opportunity.

Yes. And we appreciate your message and we do understand the math. I don't think we're, quite frankly, disputing you at all. We're just simply saying that at this point we're going to weigh a number of things and your message is loud and clear and understood.

I appreciate that.

So I think at this point I think that was the last question in our queue, so I want to thank you all for attending and thank you for the good engagement, good questions, and I look forward to the next call.

Thank you. This concludes today's conference call. You may now disconnect.