Greetings and welcome to the AudioCodes Fourth Quarter 2012 Earnings Conference Call. At this time all participants are in listen only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Erik Knettel, Investor Relations for AudioCodes. Thank you, Mr. Knettel you may begin.

Thank you, Melissa. I'd like to welcome everyone to the AudioCodes Fourth Quarter and full year 2012 Earnings Conference Call. Let me begin the call today with a brief Safe Harbor statement. Statements concerning AudioCodes' business outlook, future economic performance, product introductions and plans and objectives related thereto and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters are forward-looking statements as that term is defined under U.S. Federal Securities Law. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. These risks, uncertainties and factors include, but are not limited to the effect of current global economic conditions and conditions in general and in AudioCodes' industry and target markets in particular, shifts in supply and demand, market acceptance of new products and the demand for existing products, the impact of competitive products and pricing on AudioCodes and its customers, products, and markets, timely product and technology development, upgrades and the ability to manage changes in the market conditions as needed, possible disruptions from acquisitions, the ability of AudioCodes to successfully integrate the products and operations of acquired companies into AudioCodes' business and other factors detailed in AudioCodes' filings with the U.S. Securities and Exchange Commission. AudioCodes assumes no obligation to update that information. In addition during the call, AudioCodes will refer to non-GAAP net income and net income per share. AudioCodes has provided a reconciliation of non-GAAP net income and net income per share to its net income and net income per share according to GAAP in its press release and on its website. Joining us today from AudioCodes we have Shabtai Adlersberg, Chairman, President and Chief Executive Officer and Guy Avidan, Vice President of Finance and Chief Financial Officer. I would now like to turn the call over to Shabtai Adlersberg. Mr. Adlersberg, please go ahead.

Thank you, Erik. Good morning and good afternoon everybody. I would like to welcome all to our fourth quarter and year end 2012 conference call. With me this morning is Guy Avidan, Chief Financial Officer and Vice President of Finance. Guy will start off by presenting a financial overview of the quarter. I will then review the business highlights and summary and then discuss developments in our business and in the industry and plans for 2013. We will then turn it into the Q&A session. Guy.

Thank you Shabtai and good morning everyone. Before beginning the financial overview of the quarter, I would like to note that the following discussion will include GAAP numbers as well as non-GAAP pro forma numbers. Our fourth quarter non-GAAP pro forma results reflect adjustment for the following two non-cash items, stock-based compensation expenses which totaled $332,000 and amortization expenses relating to the acquisitions of Nuera, Netrake and CTI, which totaled $282,000. The full reconciliation of the non-GAAP results discussed on this call to GAAP results is currently available for review on our website and in the press release issued earlier today. Getting to the numbers, our fourth quarter results are in line with our previous revenue and profit guidance discussed on our conference call on October 4, 2012 and include the completion of the restructuring plan to reduce annual operating expenses as our announcement on July 11. As announced in July, the restructuring plan is generating estimated annualized saving of approximately 10% of company's operational expenses. At the end of the fourth quarter, we managed to reduce headcount by 9% compared to the end of the second quarter. The implementation of the cost reduction plan was completed this quarter. Fourth quarter revenue were 32.8 million which represent a 4.6% increase from sequential third quarter of 2012. We saw solid demand for our Core Networking Equipment Group business especially in the unified communication and contact centers market which was partially offset by some anticipated headwind we experienced during this quarter in our Technology Group and OEM business. As a percentage of revenues, sales in the Americas accounted for 53%, Europe, the Middle East and Africa 38%, and Asia Pacific 9%. Revenues associated with our growing Manage and Technical Services business line grew to exceed 20% of total revenue or $6.7 million…

Thank you Guy. We are very pleased to report the second consecutive quarter of improved financial performance. As we have stated in our release earlier today, the improvement is underlined by sequential growth in revenue, return to profitability and substantial improvement in the cash flow from operations. Growth in our networking business is being driven primarily by higher product and services sale, all in the area of unified communication, enterprise session border controllers and contact center application, all representing strategic directions for us. It isn’t prudent to realize that all the three market segments do represent fast developing sectors and application in the networking world and that they are all expected to extend future growth also over several years span. And thus they provide a very sound basis for continued growth. Further supporting these potential is the ongoing trend in enterprise gross market with the shift to unified communication and IP based contact centers and constant growth in enterprise voice services from pure on-premise solutions to cloud voice services in accurate models. Our continued investment in integrated connectivity, and new emerging technologies in the field of over-the-top mobility and voice quality of service, SLA monitoring and enhancement will further help to enhance our position in this market. Guy has already covered much of the details pertaining to our financial performance in the quarter, but I'd still like to dwell on some of the more important ones that we achieve in the quarter. We grew sequentially in sales 5.8%, a very nice growth. We exhibited good control over expense and over our OpEx. OpEx went down to 17.3 million from 18.6 million in the previous quarter, just to remind ourselves that we target 18 million on the average on a quarter level and we believe that that level is sustainable to…

Thank you. We will now be conducting the question-and-answer session. (Operator Instructions). Our first question comes from the line of Andrew Uerkwitz with Oppenheimer and Company. Please proceed with your question. Mr. Uerkwitz, your line is open. Please proceed with your question.

Shabtai, could you give us your view here on the voice-over IP adoption in Lync? It looks like Lync is doing quite well, but some enterprises are not adopting the voice side of it. Could you kind of give us your thoughts of how you see that playing out, what is going to be the catalyst there longer-term and how that is going to shake out?

Yes, I will try to do my best on that. Unified communication primarily (inaudible) Lync, is focused at least from the customers and initial deployments on two key functionalities which are presence and instant messaging. Usually, those are the first productivity tools that customers select to start with. VOIP is coming on these days. Voice is primarily more about our collaboration, mobility and there has been some slowness in starting with voice application about two years ago, we have seen some pickup in the past six months. We do believe that going forward and especially with our announcement of One Voice Lync, the ability to deploy first actually a plan, design, implement and deploy provision, a complete voice solution end-to-end will be much easier. So we believe that we will see acceleration of that in 2013. Rest assured, that any customer who has deployed Lync and is not using the voice today will definitely transition either this year or next year to retiring the old PBX. So all in all, complexity is playing for us, allowing us to create advantage and then by providing a complete solution we do believe that with the Microsoft introducing mobility, we have heard early this year, we do believe that voice would pick up as well. All in all, we have huge infrastructure of Lync that will be developing for us.

Do you think it's on the IT manager who just doesn't want to upgrade or doesn't want to change out the PBX? Or is it just a matter of the budget, say, previously could handle the presence and the next year's budget is going to do the voice? What's kind of like your experience talking with these projects? How is the IT manager kind of looking at it?

Okay, well before we go to that, I'll just mentioned that we've seen much emphasis from Microsoft on licenses and licenses not necessarily included voice in the past, so we do believe that part of the reason for voice not being developed two years ago and last year was primarily because the emphasis was on pure (inaudible). That is changing now and we know that as of fiscal year '13, at Microsoft there is emphasis on voice too, so that’s a change. Also from the IT manager point of view as you have mentioned, there is usually no forklift in such situation. Usually the move and position to Lync would be first to deploy the presence in IM and then add gradually the voice. I do believe that mobility is a key factor and the fact that Microsoft will be introducing Lync mobility, we understand in the next few weeks. That will definitely make a change in deploying voice in Lync too.

And then if I could just ask one quick one here. Could you kind of review kind of the strategy or the thought process behind you moving more towards the service aspect of the voice-over IP? Because it looks like your competitors are not going in that direction. So could you guys talk through your thought process there?

Yes, well I think we haven’t focused on it, but I think we really, in many ways, the milestone here in the company is doing that. We are changing strategy from a company that focuses on best of breed products, and we've been always very good in deploying gateways and session builder controls and other standalone products. We now move to more complete solution and services that are needed to deploy those solutions. Now we do see that the end customer has substantially higher appreciation for a complete service and solution. And I think we are basically trying towards the end users requirements. And that is the shift. We saw that about two years ago and this is why while some people did not understand why we invest in IP phones and why we do engage in more products. The idea was always, unified communication is going to be one of the largest markets in the world. There is an open network solution Lync, Microsoft Lync that’s developing. There is a room for companies with clear competence on voice to play there. And that was the strategy that we have basically initiated two years ago. And therefore we have developed so many different pieces of equipment. Obviously other people take best of breed approach and will try to compete on a gateway side and/or session by the controller only or IT funds only but we do believe that our comprehensive solution bundled with services that will be a winning factor. I think for an end customer, it will much easier to get a complete working and suppose a solution from one vendor than having to deal with four, five, six or seven different parties.

Thank you. (Operator instructions) our next question comes from the line of Rich Valera with Needham & Company. Please proceed with your question. Rich Valera - Needham & Company: Shabtai, I was wondering if you could talk about what percent of your revenue was derived from Lync-related sales in the fourth quarter and how you see that trending through 2013.

Okay, well usually we do not report on the breakdown of sales into specific segments. I will say generally that in 2012 Lync was above 15 million of sales. We do expect that in 2013 we will grow in the Lync environment more than 30% - 35%, so those are the numbers we can quote. Rich Valera - Needham & Company: And then, with respect to the competitive landscape for your business, you mentioned you are kind of the only end-to-end supplier. I think one of your major competitors here is NET, recently acquired by Sonus, or at least last year acquired by Sonus. How do you see them in the marketplace and how has that transition been? Has it been disruptive, i.e. beneficial to you? And how do you differentiate yourselves from them, because they talk a lot about their Lync certification as well?

Right, well I don’t one can compare between the two companies. We do provide a complete solution end-to-end solution including phones including gateways session border controls, session experience management will come with unified management and a complete solution. NET acquired by Sonus do compete on a very narrow basis on the gateway side and on the integrated gateway and session board controller side. So, we do see than as competition on that partial area but not in the full context and I do believe that an end costumer facing a decision to go with several vendors among them NET Sonus or choosing a more complete fully working solution. In my mind, I think the answer is known. So that’s how I relate to that competition. Rich Valera - Needham & Company: And then the technology segment has obviously been declining for a while here. It had a pretty big decline in 2012. Can you give us any sense of where you think we are on the revenue trajectory of that relative to 4Q levels? Do we think we've found some stability here, or should we expect to see further declines to some level in 2013?

Right. To a certain level we have seen in the last two quarters, since the middle of 2012, we have seen some stability. To give you numbers, in 2011 we sold about 34 million in debt (inaudible) in 2012 we came down to 24 million. We do not see any more such broad changes going forward. So, we do believe that we might see 10-15% decline from the 24 million level, but we do not see a major decline as we have seen in the past two years. Rich Valera - Needham & Company: And finally, I don't know if you gave any color on how the first quarter is looking, but either way, I wonder if you could talk about how you are thinking of the first quarter from a revenue sort of seasonality standpoint, and if we think these expense levels from the fourth quarter are about the right level to model going forward or if there might be any variation from them. Thanks.

Right. So, usually the first quarter at AudioCodes is roughly about flat or, give or take a few hundred to thousands. This is the plan. We do not see major deviation this year. Also we are at the end of January and January usually is a slow start for the year, so there is no ability for us to give you any differences. In our plans Q1 should be around Q4 give or take. In terms of (inaudible) we do expect keep managing expenses on an 18 million level the quarter, so we do not see major change in the core for that.

Thank you. Mr. Adlersberg, no further questions at this time, I'd like to turn the floor back over to you for closing comments.

Okay, thank you operator. In summary of our call we look forward to growing our business in 2013 and further build the infrastructure for continued prosperity in coming years and follow on with the momentum that we have generated in the second half of 2012. Finally I would like to thank everybody for participating in our conference call today and we look forward to have you on next conference call. Thank you very much, bye, bye.

Thank you. This concludes today's teleconference; you may disconnect your lines at this time, thank you for your participation.