Ladies and gentlemen, welcome to the Cognizant Technology Solutions Second (sic) [Third] Quarter 2010 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to David Nelson, Vice President, Investor Relations and Treasury at Cognizant. Please go ahead, sir.

Thank you, operator, and good morning, everyone. By now, you should have received a copy of the company's third quarter 2010 earnings release. If you have not, a copy is available on our website, cognizant.com. The speakers we have on today's call are Francisco D'Souza, President and Chief Executive Officer; and Gordon Coburn, Chief Financial and Operating Officer of Cognizant. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. I would now like to turn the call over to Francisco D'Souza. Frank, go ahead.

Thank you, David, and good morning, everyone. Thanks for joining us today. I'm happy to report that Q3 was another strong quarter performance for Cognizant. Third quarter revenue was $1.2 billion, a sequential increase of 10% and an increase of 43% year-over-year. We maintained our non-GAAP operating margin at the high end of our target range, and we achieved record cash flow level. For the third straight quarter, application development grew faster than application maintenance by a strong margin. Maintenance grew 6% sequentially, while development, an indicator of discretionary spending, grew 14%. Again this quarter, our growth was broad based across sectors, geographies and service offerings. A portion of the growth in discretionary spending in the third quarter was the tail end of pent-up demand created by two years of cost-cutting and conservative spending. But we think more significantly, the overall increase in spending over the last two quarters, three quarters, is a validation of our view that our clients are dealing with more than the after effects of a cyclical downturn. As I've said on past calls, the major industry that we serve are going to fundamental secular changes. The secular changes that we see clients addressing are driven by three global trends that are rapidly reshaping the way forward-thinking companies operate. These trends represent three pillars upon which a new normal in some senses for companies is defined. The first pillar is a new generation of highly distributed and virtualized business models. These models are pushing global talent integration to new levels in search of dramatically better efficiency and effectiveness. The second pillar is a new generation of technologies. Loosely labeled under the umbrella of cloud computing, these technologies, including Web 2.0 mobile computing and social computing and cloud computing, that are once again changing the price performance…

Thank you, Francisco, and good morning to everyone. As Francisco mentioned, our strong revenue performance is broad based with all of our major industry segments experiencing strong demand. During the third quarter, we continued to experience strength in our Financial Services segment, which includes our practices in insurance, banking and transaction processing. This segment grew 10.5% on a sequential basis and 42.9% on a year-over-year basis. It represented 42.8% of revenue for the quarter. The current demand within Financial Services continues to be fairly broad based across our client base. We're seeing continued focus on initiatives to drive cost efficiencies and operational effectiveness; projects related to regulatory-compliance and risk management; discretionary innovation initiatives to enhance competitive positioning; and finally, M&A integration work, which we expected to ramp down during the quarter was extended through the latter part of 2010. Healthcare continued its growth during the quarter with 7.4% sequential growth and 33.9% growth compared to the third quarter of 2009. This segment represented 24.9% of revenues for the quarter. We experienced similar sequential strength among both our Healthcare Insurance clients and our Life Sciences clients. Demand within these clients was driven by data warehousing and analytics services to better understand the controlled medical costs; expansion of BPO services, including clinical operations, claims benefits coding and enrollment; IDC 10 code set and 5010 assessment remediation work; and platform modernization initiatives. Retail manufacturing logistics were once again very strong during the quarter. This segment continue to build on the growth from the first half of the year and 2009, growing 13.3% sequentially and 57% year-over-year. It represented 18.9% of revenues for the quarter. Demand within this segment was driven by an increase in large-scale transformational and system integration projects among our major manufacturing clients. For our retail clients, we've seen an increase…

[Operator Instructions] Your first question comes from the line of Julio Quinteros with Goldman Sachs.

Starting with Francisco, real quick question in terms of the risks from the new technologies. We have these debates, I think all the time here internally, about the types of risks that SaaS and cloud and virtualization could present to the SI, kind of the broader SI business, the Systems Integration, the [indiscernible] business. As those things get implemented an installed, what do you guys see as the risk of potentially losing revenue opportunities as those platforms are put into place? And I guess, in some sense, people think that ultimately leads to less consulting demand. How do you guys think about that potential risk for your model?

Julio as you said, there's a lot of philosophical debates on this issue going on right now. If I would summarize it, what I would say is that as we've gone out there and we've looked at this and started to actually do work for our clients across the range of technologies, I think that our view is that the nature of demand is different. It's a different wave like when we saw other technology shifts in the past, we have to make sure that we retool ourselves, and we're doing that actively for the new generation of technologies that are out there. But we think that the same drivers that drove demand for customization and systems integration in the past will continue to be the case with this new breed of technologies. In the end, the new technologies need to be put to work for clients, and that requires customization. It requires implementation. It requires systems integration. And those things will be done differently, but will still need to be done, and we think that will drive demand for our services.

And just as a quick follow-up for Gordon, can you just elaborate a little bit on what you're thinking is around the -- what the impact is of the statement. I think you made a statement about final stages of pent-up demand. How are you thinking about what that means? And I know we haven't heard or seen a 2011 guidance yet, but just curious on the final stages come and in terms of, how you're think about how that projects out?

Sure. We were originally expecting the work related to M&A work to ramp down during the third quarter. It didn't actually grew a bit in the quarter as the projects got extended. We don't expect any further growth in the fourth quarter. We would expect that work to be essentially flat to maybe trailing off in the latter part of the quarter. And then obviously most of it would be wrapped out by the time we go into Q1. I don't expect it to have any material impact on our overall 2011 growth, but as more comments related to, it was a positive surprise in Q3. And we would not expect that to continue in Q4.

Your next question from comes the line of Jason Kupferberg with UBS.

Just a demand and a supply question, if I could please. On the demand side, just wanted to get a qualitative sense of how you feel about Cognizant's prospects for revenue growth over the next 12 months versus how you felt a quarter ago? There's obviously still some macro crosscurrents out there, which you guys acknowledged. But offshore spending in a big-picture sense seems to be accelerating. You guys seem to continue taking share so any qualitative commentary there would be great.

Sure, let me give you some demand color. As we go into the fourth quarter here, obviously, we're out with our clients talking to them about their plans for 2011. At this point, it's very early in our clients budget cycles. But the early indications that we have are that 2011 IT budgets, will have somewhat of an upward bias as you go into 2011. So that's an overall positive sign. As you mentioned, we continue to see the trend that clients, as I mentioned during my comments, clients are outsourcing more the range of services, the clients are now comfortable moving into a global delivery in an offshore model and an outsource model, has increased considerably. And we feel like we've made a lot of the investments over the last two, three years to position us well to capture that. So we expect to benefit from that trend.

And then just on the supply side, are you guys seeing any concerning amount of shortage in terms of supply for certain skill sets in the current environment?

Clearly, the demand for talent has increased significantly over the last three quarters, and you've seen that in the attrition rate in the industry. However, with the exception of, what I would point to as what niche skills or particular pockets of technology expertise that you always have flash points around, we don't see overall macro concerns as the supply of talent from the universities is still extraordinary good in India. And if anything, we are better positioned than we've ever been in the past in terms of our positioning on the campuses in India because of our strong track record of hiring throughout the crisis. That plays very well for us on the campuses, and I think we are very much regarded even more so if that's possible as an employer of choice with the campuses in India. So we feel very optimistic about that source of talent.

Just to follow up, that's a very important point. We have our best track record or highest level of day one slots that we've had in our history this recruiting cycle. And we think that's a direct result of the industry-leading growth that we have. And therefore, our ability to promote a higher percentage of our employees so either college students see that they could grow their careers faster with us. And therefore, we're getting very preferential treatment in recruiting.

Your next question comes from the line of Brian Keane with Credit Suisse. Bryan Keane - Crédit Suisse AG: I just want to follow up on discretionary spend. Looking at the development revenues, obviously, sequentially it's growing quite strong. Can you just talk about kind of what you're seeing from clients in discretionary areas? And do you think that should continue, especially in e-commerce and financial services in particular?

As I said during my comments, our hypothesis has been, for some time now, that some of the discretionary spending was driven by the structural changes that we see industry is going through. And we feel very confident now of having watched this trend for three or four quarters, that, that is in fact, the case. The clients are really dealing with these three big forces. There's a whole new generation of technologies that are out there, that are creating new opportunities for them that are changing the price performance curve of technology. There's a new generation of workers and consumers. The millennial generation, they are really demanding a different technology experience than a year or two or three ago. And finally, there's this new generation of highly distributed and globalized business models that clients are beginning to adopt and feel very comfortable with. All of this is driving new development, application development systems integration, what you might think of as the more discretionary side of our business. And we think those are long-term trends across the industries that we serve. Specifically in Financial Services, I think that as growth returns to that industry and more stability returns, what we're seeing is a demand that's driven by some of these Future of Work concepts. So when you think about new generation of consumers that are demanding more integrated online banking experiences, a better or more robust mobile banking experiences, and so on and so forth, you're starting to see that kind of demand. And then of course, there's a lot of technology deployment that's being driven in Financial Services as a result of the regulatory initiatives, FinReg and son on and so forth that's requiring Financial Services institutions to put in new technology around risk management and so on and so forth to be able to address the regulatory compliance issues here in the U.S. and also internationally. Bryan Keane - Crédit Suisse AG: On pricing, Gordon, you talked about pricing being 1% on-site and flat offshore, but it sounds like the momentum on pricing is pretty positive. Can you just talk about what pricing might do and in the coming quarters?

Yes. We're fairly good about the conversations that we're having with our clients. As you know, we've been out talking to clients for a couple of quarters. We continue to talk to them. And clients understand that costs are going up that we help them out during the economic downturn, but price increases is needed for either late this year or 2011. These are not going to be huge price increases, but it's clearly moving in the right direction. What ultimate impact it will have on 2011 is a little too early to know, but certainly I would expect, on an apples-to-apples basis, our pricing to be up. And then it's a question what happens with the mix shift.

Your next question comes from the line of Darrin Peller with Barclays Capital.

Margins have been, at least, at the high end of target range for some time now. I'm just curious, I mean would you say your targeted range is maybe closer to 19.5% and 20% at this point? Or has there really just been pent-up demand that's sustaining margins higher than a more normalized level?

Obviously, revenue has been very strong for the last couple of quarters, and we've exceeded our expectations. And certainly, if revenue comes in strong late in the quarter, we can't spend all the money. We continue to focus on 19% to 20% range. Obviously for a while, we've been running at the high end of that range, but we don't have any plans to narrow it.

Just a quick follow-up, can you quantify a little more on wage inflation? Just what exactly do you see this quarter? What do you expect over the next couple of quarters in this pricing that you disclosed enough to offset any type of wage inflation changes?

Sure. We did our wage increases in the first half of the year. And other than -- obviously, we do -- people get promoted in the fourth quarter, get a salary increase. But besides that, there is no additional wage increases. So we had a one-time cycle this year, which I believe, pretty much everyone else in the industry has done. And I think people have largely been, fairly disciplined on wage inflation. Certainly it was up from 2009. We would expect to do our next wage increase during the second quarter of 2011. So we expect to continue on an annual cycle. A little to early to know how big it'll be next year and a lot of that will depend on what the competition does. Today's competition has been very disciplined in wages because I think everyone understands that it's not possible to gain competitive advantage on wages.

Your next question comes from the line of Joseph Foresi with Janney Montgomery.

I know it's a little bit premature, but I'll throw the question out there. Just looking at 2011, any way you can quantify what you're hearing from clients as far as budgets being set and as far as any potential increase in those budgets? Do you expect a wallet share of off-shoring to kind of increase heading into that year?

Joe, it's Frank. Look, I think that it's still early in the budget cycle. Let me say a couple of things about budget. First of all, this year, we're seeing the timing of budgets have gone back to being what I would call, a more normal cycle. So we expect that our clients will finalize budgets as they have in more normal times at the latest during the middle of the first quarter of next year. So with that schedule in mind, it's important to know that we're still relatively early in most clients' budget cycles. But based on what we've seen so far in the early conversations we're having, as Gordon pointed out earlier, we do think that budgets for next year will have their -- their indications are that budgets are poised for a slight increase next year. Hard to say exactly how much that increase is at this point, but we do think budgets will be up. IT budgets will be up next year over 2010 levels. Within that though, I think that the trend of offshore, in general, or outsourcing more broadly, will have a greater share of that. I think it's definitely the case. We're seeing clients pushing the envelope on the traditional services in terms of looking at areas of even application outsourcing or application development that they may not have traditionally outsourced. But then there's this whole new set of services, IT Infrastructure Services, Business Process Outsourcing, Engineering and Manufacturing Services, Enterprise Analytics, that historically three or four years ago or two or three years ago even, clients would not have considered outsourcing or offshoring. Those are now viable candidates. And so, I think that you'll see the trend to offshore in capturing a greater share of the IT wallet and the IT budget, continuing strongly.

So just excluding maybe the M&A ramp, which is going to make its way through the numbers, are you more positive about heading into 2011 than you were heading into 2010? Is the environment looking better than it was a year ago?

Yes. I think -- look, clearly the environment's more stable. And I think a more stable environment allows us to plan better. I think IT budgets are looking like they have a positive buy so they said, which I would not have said at this time in 2009 coming into 2010.

Just real quickly on the attrition side, when can we expect that number to go down and when do you start to get overly concerned about it? Maybe you can just give us a little bit more color how you're looking at it because I know you commented about getting more of day one slots?

I would expect it to come down this quarter from Q3 levels. The trend has been positive in October versus what we saw in the earlier part of the second quarter. So our expectations starts to come down. It won't come back down to normal though in the fourth quarter. I think that will -- to get back to a more normal level, the college kids, not just for us but for the industry, have to or must be on boarded and trained. They're all being on boarded now, which means they become available for billing first, second quarter of next year.

Your next question comes from the line of Ashwin Shirvaikar with Citi.

My first question is, as you look at your average clients uptake of your services, is it possible to quantify the forward-looking potential? I mean, can this client be 2x or 3x their current size in the next, let's say five years in terms of picking up some of these new offerings that you have?

This year, Ashwin, you're hitting on a very cheap point. Our addressable market within most of our customers has expanded dramatically over the last couple of years as we've expanded our range of services, whether it be into BPO or infrastructure management or consulting or testing or ERP. So the addressable market at each clients is bigger. And therefore, what has happened even as we've grown our relationships, the penetration rate at those specific accounts has not grown at the same pace because the market at that account is getting bigger. So we actually feel very good about the opportunity that still exists at the vast majority of our clients simply to the fact that there are more things, more wider range of services that we can offer to them.

A couple of nearer term questions, one is your comments on no-fourth quarter budget flush. Is that what clients are telling you or is that sort of a net result of 4Q seasonal demand being offset by some M&A drop-off? And then a last question would be, is it faster than anticipated growth, will that help your 2011 tax rate?

Actually, let me do the first part of the question. I'll turn it to Gordon on the tax rate question. Look, the pent-up demand question, there isn't a scientific way around this. This is based on our conversations with clients and our own intuition about what's going on in the marketplace. The reality was that, we saw quite a consideration, as you know, very strong Q2 and Q3 spending from our clients. And our sense right now is that there isn't a lot of -- budget flush tends to happen when clients have a little bit of extra money at the end of the year in their budgets and they want to get it used in the fiscal, the calendar year. Given this strong spending we saw in Q2 and Q3, I don't think that there's a lot of extra money out there that clients are going to spend in Q4. So based on that and conversations with clients, we don't think that there's a lot of pent-up or rather budget flush that's waiting to happen at the end of the quarter.

Ashwin, on the tax rate, you're correct that the stronger growth this year, which obviously, is the base for growth for next year, helps our tax rate in 2011. However, in the last couple of months, the new government has made it clear that the reduction in the actual tax rate in India won't happen to 2012. So those two things kind of offset each other. And at this point, we're still expecting a tax rate due to the expiration of holidays in 2011 of somewhere between 23% and 25%. At this point, I think most people have modeled in the high end of that range. And I think that's probably appropriate.

Your next question comes from the line of Mayank Tandon with Signal Hill Capital.

Francisco, you mentioned about regulatory opportunities. Can you give us some sense of timing in terms of when the impact would actually happen? Will it happen today as we speak or is this more of an FY '11 scenario? And also maybe size it for us in terms of what the opportunity could be relative to maybe other opportunities that you've had in the past?

Look, I think that we're already benefiting to some extent from the regulatory work. If you look at some of the near-term stuff that we've talked about in healthcare, for example, Gordon mentioned ICD-10, 5010 remediation and so on, those projects are underway generating revenue and have been a part of our healthcare growth story over the last few quarters. So some of that's already underway. As it relates to the broader issues of financial regulatory reform, Basel III internationally and big healthcare reform in the United States, I think those will drive 2011 opportunity for us. Sizing it is still too early for me to give you a good sense of that for 2011 and longer term because I think that how these unfold and how much of it we can capture still remains to be seen. But clearly, we'll generate 2011 opportunities for us.

Will it be a big burst in spending or is really more of a step function? And also if you can comment on how does this get funded? Does it come a way from maybe certain areas where you would have had spending, but this is going to be taking share from that? So at net-net, it's probably going to be more neutral in terms of driving incremental growth?

I don't think you're going to see big surges in spending for one-time or for a short period of time than tapering off. I think that these are longer-term initiatives lines. Clients are taking steps in terms of implementation. There are some deadlines out there or will be some deadlines out there, which may drive spending patterns. But in general, our view right now is that these are going to be more incremental spending over '11 and '12. In terms of how they've been funded, I think there's going to be a mix. I think that some of it clearly will clearly cannibalize dollars that clients would otherwise have spend on other things. So the business is usual dollars or the maintenance dollars might move more towards regulatory-related enhancements and fixes. But I think that there's some amount of work that needs to be done, particularly the work that's needed to drive new capabilities that will require incremental funding. We think that, that's actually a great opportunity for us because what we see is that in current situations, what clients are doing is outsourcing more of their business as usual initiatives to use the savings that they generate from offshoring and outsourcing to fund the investment that they need in new capabilities and in regulatory enhancements. So we think that overall, that's going to be a positive for us because it'll drive more work offshore to be able to fund the investment that clients need to make in these new capabilities.

And Gordon if I could ask you on pricing one more time. Is this truly apples-to-apples rate increases? Or is it really more a question of the mix of services that's driving pricing increments?

In terms of getting price increases, we're getting price increases on apples-to-apples basis. How that flows through the numbers obviously gets impacted by a mix. So the 1% up on-site, flat offshore, that includes mix, but there wasn't a whole lot of mix impact this quarter. So that's why it's tough for me to say what will happen with pricing next year including mix, but excluding mix, clearly we're getting price increases.

Your next question comes from the line of Edward Caso with Wells Fargo.

Was the attrition and maybe the tightness in the labor market impact your ability to grow even faster than you did this quarter?

Look, I think, Ed, there are certainly some of that. We have -- utilization rent very, very high in the third quarter. It was up from the second quarter. And so, we've started to hire even more aggressively. And our goal is, utilization will bounce around over the coming quarters, but our goal is to bring it down a little bit at this point. So clearly tightness in the labor market, more importantly, our ability to hire an onboard. We measure that carefully so that we make sure that we're not compromising on quality of what we deliver to clients. And that's always a trade-off that we're going to make.

And my other question is on -- so your crystal ball as far as what's going on in Washington. We understand no matter what happens at Senator Reid, Senator Schumer, who's not a big fan of offshoring global delivery. It will take a bigger role in the Senate. Maybe you can give some thoughts on what you're hearing and what implications there might be for the firm?

You're right, I don't have a crystal ball. But I guess by tomorrow, we will need a crystal ball so we'll know what's happening at least in terms of the mid-term elections. But look, we're on the eve of President Obama's trip to India. And I think that there's been some statements, some briefings out of the White House, which have in preparation for his trip, which I think have put the issue in perspective. I think that the India-U.S. relationship is a very strong bilateral relationship, which outsourcing is one piece. But as you may know, exports of U.S. production to India have grown dramatically over the last few years, I think now accounting for something like $27 billion to $30 billion a year. I think that Indian companies in the United States account for employment of about 60,000 people in the United States. And so, I think that there's a broad recognition that the India-U.S. relationship needs to be a strong bilateral one based on trade going in both directions. I think that's going to be a big part of the discussion that happens when President Obama visits India in a few days here. And I think that that's context in which we believe the outsourcing discussion needs to be had, which is flow of goods and services in both directions.

Your next question comes from the line of Nabil Elsheshai with Pacific Crest.

I was wondering if you're seeing any difference in demand trends either for Q4 or more importantly on what you're earning for budgets between U.S. and Europe?

Obviously, the U.S. economy has stabilized before Europe. So we saw the pickup in the U.S. kick in first. U.K. seems to be doing okay now. Still keeping an eye on the continent, so a little bit too early to declare a victory there. So if I think about Q4, I would kind of rank by enthusiasm in that order.

And then on the solution side of things, you highlighted a couple in your prepared comments. Is there anyway to quantify what percentage of revenues tied to those types of solutions and where you think that can go? And then do you look at that area as kind of the primary area focus for M&A?

Let me talk about M&A. Our view with M&A is that, for a while, we've said that our approach -- let me start with our approach. Our approach to M&A is to look at small tuck-under acquisitions that add capability in specific areas. For us, when we think about the size of Cognizant today, and we think about what our tuck-under acquisition means, our sweet spot really is probably in the $20 million to $80 million range, may be going up as big as $200 million in revenue, but really $20 million to $80 million is sort of our sweet spot of revenue for an acquisition. We like to that size of acquisition because we feel it's easier to get our arms around cultural integration is easier with those kinds of acquisitions. When it starts to get larger than that, then the risks of both acquisition become more significant. And frankly at this point, we're looking to add capabilities. We're not looking to acquire for growth. When we think about the kind of capabilities that we're looking to add, certainly the emerging service offerings is a key area. So IT Infrastructure Services, Vertical Business Process Outsourcing and then some of the new ones, like EMS and Analytics and EMS of Engineering and Manufacturing Services or Analytics, would be areas that we look at. We also would be looking at acquisitions from a geographical expansion standpoint. So we did the acquisition of Galileo some time a couple of quarters ago. In France, we'll do those kinds of acquisitions that give us specific geographic capabilities and footprints, and then potentially look at acquisitions that deepen or broaden our industry footprint. So that's really our screen and how we're looking at. In terms of the emerging services, your first question and the percent of revenue, we haven't actually broken those out in the past. But clearly, if you look at those us a portfolio of services, those are growing ahead of, in general, ahead of company average and we expect that those will continue to do so over the coming quarters. Although, some of that is because they're off a smaller base at this point.

Last question, Gordon, on utilization. If you do see attrition come down, you guys have obviously run utilization higher than historical norms, do you think that utilization rates that we've seen will start to decline a little bit? As attrition slows down, you continue to hire?

It's going to bounce around a bit from quarter-to-quarter. Would I like it, on average, to come down slightly? Yes, slightly. I don't think it needs to come down dramatically. But what's going on about the clarity [ph], we're somewhere in the range now so it'll bounce around. But if I was betting, I bet, I'd try to get down a little bit.

Your next question comes from the line of Joseph Vafi with Jefferies & Company. Joseph Vafi - Jefferies & Company, Inc.: Anything we should read into the large percentage of lateral hires in the quarter, relative to shorter-term demand and deploying those already trained people versus what maybe we'd see in a more normal environment?

Joe, the point you're hitting on was a big issue in the first half of the year, where we would, very heavy percentage of lateral hires just because the demand came back so quickly. We're starting to catch up now. So this is the first quarter in a while that college hiring actually exceeded lateral hirings. And I think this is an industry-wide issue. And as we get a couple of quarters under our belt, a lot of college kids coming in, that should help the attrition issues. So the trend clearly went in the right way, which is shifting back towards college hiring. They just took us a couple of quarters to get there because revenue growth was so strong. Joseph Vafi - Jefferies & Company, Inc.: If pent-up demand kind of does indeed end here, and under the pieces that a lot of the pent-up demand was fulfilled with on-site versus offshore or higher on-site mix, would we expect to see maybe a mix shift more towards offshore next year or even seeing a number of people on site kind of go down a little bit at some of your clients?

It's Frank. I don't think that the pent-up demand was fulfilled by, Joe, by services or for any reason, had a higher on-site component. I think it was right in line with our traditional delivery model. So I don't think that the pent-up demand somehow drove on-site ratios up. And I don't see anything that will change the mix anything that will change the mix, the ratio on-site, offshore significantly next year except mix shift. As you know some of our service offerings have much higher offer components like BPO and IT Infrastructure Services. And so to the extent those become a larger portion of revenue next year, that might shift the overall company mix more offshore. But beyond that, I don't see anything else moving the mix dramatically.

Your last question comes from the line of Rod Bourgeois with Bernstein.

Just wanted to ask a question on the demand front real quick. Gordon, I guess I'm wondering whether you're feeling at all a need to temper expectations on the Street at all. Consensus is that almost 24% revenue growth for 2011 and likely to come up some more after today, it sounds from your report like demand drivers are very much in place for a strong 2011 and your guidance for December certainly looks solid, but it's also unclear that discretionary spending in 2011 will be as strong as it is in 2010. So I guess overall, are you feeling okay about where consensus estimates are at this point as we head into the 2011 time frame?

So let me take, hit two things on that question. First of all on Q4. The pent-up demand being finished that was important because there was a big driver in Q2 and Q3 sequentially, and we don't view that as a driver in Q4. So I know we wanted to keep people's expectations for Q4 sequential growth in check. A little to early to know for 2011. Until we clients finished their budget cycle, we understand what impact will the regulatory changes have. Obviously we won't benefit in 2011 the way we did in the first half or first three quarters of 2010 of the same level of search and development spending from pent-up demand, but obviously, there's some other important growth drivers out there. But we just have to get a little further in the budget cycle to have a view on 2011. But Q4 2010 obviously, that pent-up demand is finished.

And then as part of your comment about Q4, lacking as much in the pent-up demand category, is part of that a function of the M&A sort of ramp-down activities that you're seeing? And if so, can you give us some numerical idea of how big the M&A ramp down might be? I mean, how many millions of dollars of projects is the M&A ramp down worth?

For Q4, I would think about M&A more as you're not just seeing growth. In Q3, we still have substantial growth in M&A work, where we're not expecting that. It's clear we won't have that growth in Q4. But the important point in Q4 is we certainly don't expect the same level of new project kick-offs on development work that we experienced for the last couple of quarters. All that being said, demand's still healthy, but there's some surges that we would not expect to reoccur in Q4.

Gordon, part of that lack of new project kick offs, I mean that's partly just a function of Q4 where things often slip into January with new budgets. Is some of that seasonality or is it more than just normal seasonality in terms of project kickoff being not quite as strong as in the last two quarters?

I think it's a little bit of each. There's no budget flush this year. And you're absolutely right, we tend not to have a lot of kickoffs in Q4 or the first month of Q1 until people locked down their budget. I think we're a couple of minutes over here, so I just want to thank everyone for allowing us to share our Q3 results. We're confident that we're positioned to address the many changes in the marketplace that will drive our future growth. And we'll look forward to continuing discussion of our performance with you next quarter. So once again, thank you, all very much for joining us this morning.

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