Beginning today’s meeting is Pamela Padgett, Vice President of Investor Relations and Corporate Communications, please go ahead ma’am.

Hello and welcome everyone to Harris Corporation’s First Quarter Fiscal 2007 Earnings Call. I am Pamela Padgett Vice President of Investor Relations and Corporate Communications. With me on the call is Howard Lance, Chairman, President and CEO, Gary McArthur, Vice President and Chief Financial Officer and Bob Henry, Executive Vice President and President of the Government Communications Systems division. In the course of this teleconference management may make forward-looking statements. Forward-looking statements involve assumptions risks and uncertainties that could cause actual results to different materially from those statements. For more information and discussion of such assumptions risks and uncertainties please see the press release and filings made by the company with the SEC. In addition to our press release and on this teleconference we will discuss certain financial measures and information that are non-GAAP financial measures. Reconciliation to the comparable GAAP measures have been included in the table, our press release and on the investor relations section of our website which is www.harris.com. A replay of this call will also be available on the investor relations section of our website. Howard, it gets turn over to you.

Thanks Pam and thanks to all of you once again for joining us today for our Q1 earnings call. Harris started its new fiscal year with an excellent Q1. Posting outstanding revenue and earnings growth. Revenue for the Q1 was $947 million, a 25% increase compared to the prior year quarter. Organic revenue growth continued at a very strong 18%. Orders in the Q1 increased 53% to $1.1 billion significantly outpacing revenue and setting the stage for a continued growth throughout fiscal year 2007. Orders were higher than the Q1 of fiscal 2006 and each of the company’s four business segments. The sales opportunity funnel continues to be strong and our investments and R&D are creating some very successful new products. Non-GAAP net income in the quarter increased by 48% to $97 million. Non-GAAP earnings were $0.69 per share a 47% increase over the last year. Now let’s get right into the segment results for the quarter. Government communication systems revenue was $459 million, 6% higher compared to the prior quarter as revenue increased across the department of defense, civil programs and technical services business areas. Operating income in the quarter was $53 million. Margins continue to be very strong at 11.5% sales. We believe operating margins in this business of 11% to 12% are healthy, sustainable and above our peers. Revenue growth was primarily driven by three of our largest government systems integration programs. The five year $600 million field data collection automation program through the US Census Bureau. This will enable the first paper less, door to door census in 2010. Harris has already delivered 100 fully functional hand held prototypes with integrated GPS and cellular capabilities and our customer is very satisfied. The ten year $1 billion Patriot operations and maintenance support program for the National Reconnaissance…

Thank you, Howard. Good evening. Before discussing Harris’s financial position, I would like to make a few additional remarks regarding the proposed combination of our microwave business with Stratex Networks. All required antitrust filings have been made and the Form S-4 has been filed with the SEC for the review and comments. We anticipate proxy materials will be sent in late November to Stratex Networks shareholder seeking their approval of the merger. The closing is expected to occur early in calendar year 2007. As set forth in the S-4 materials, the newly formed public company, Harris Stratex Networks, Inc. will be traded on the NASDAQ global markets and will have the same June fiscal year end as Harris Corporation. Both the Harris’ Microwave and the Stratex Networks management teams are fully engaged in anticipation of the closing. Integration teams has been formed and cost saving targets assigned to each team. Forecasted savings from synergies for fiscal 2008 remain at $35 million to $40 million with estimated acquisition and integration cost that will impact the new company’s income statement, estimated at $40 million to $45 million. The majority of the acquisition and integration related costs are expected to be incurred in fiscal 2007. And after netting out the effects of minority interest are expected to negatively impact Harris Corporation’s fiscal 2007 EPS by approximately $0.12. Harris Corporation will also realize a substantial gain at the time of the merger closing. The gain can only be calculated as of the closing because it is dependent upon Stratex Networks’ closing date share price. Using the Stratex Networks share price as of yesterday’s close, Harris would have recorded a gain of $0.82 per diluted share. A detailed description of the calculation for determining the gain is available on our website. Excluding the above described…

Thanks, Gary, let me close by summarizing our consolidated financial outlook for the year. Since our last earnings call in July, we have increased earns guidance for fiscal year 2007 by an additional $0.10 per share. So non-GAAP earnings guidance for 2007 is now $2.70 to do $2.80 per share. This represents a year-over-year increase of about 24% compared to a prior year non-GAAP earnings of $2.22 per share. Revenue is now expected to be in the range of 13% to 15% higher than fiscal 2006 with strong organic revenue growth of 11% to 12%. In our Government Communication System segment we are increasing our expected fiscal ‘07 revenue growth to 5% to 7% higher than fiscal 2006. Operating margins are expected to continue to be in the 11% to 12% range. In the RF Communication segment, we are increasing expected fiscal 2007 revenue growth to 30% to 35% higher than fiscal 2006 and operating margins should be approximately 34% for the year. For our Microwave segment, we are also increasing our expected fiscal 2007 revenue growth to 10% to 15% higher than fiscal 2006. We expect operating margins for the year in total to be in the 9% to 10% range. And finally I already discussed in the Broadcast segment, we are lowering our expected fiscal ‘07 revenue growth to approximately 15% higher than fiscal 2006 with operating margins in the 10% to 11% range. At this point I’ll ask the operator open the line and we’ll take some of your questions.

Thank you. [Operator Instructions]. And we’ll hear first from Chris Donaghey of Suntrust.

Hi, good evening guys.

Good evening

Howard, first of all on the Tactical Radio market, is there any way that you can help quantify for us what the growth outlook is for the market over the, say, two or three-year time frame and how you should grow relative to that because again I continue to believe that there has been an intent enough scrutiny on your Tactical Radio business, so if you could help kind of put some quantification around the growth parameters for that business over the next couple of years it might help.

I think there has been undue concerned about the future of that business gross. Yeah, do I expect growth at RF in fiscal 2008? Absolutely, I think our strategies for growth at that division are clearly working based on the results. We have higher expectations for new orders in fiscal 2007 I’ve discussed those. We’ll exit the year with substantial order backlog. We have got, I think a significant new product pipeline, pumping out new things force to sell with lots of new features. We talked about previous the Falcon III handheld in vehicular version, now we have all set for 2008, the manpack versions of Falcon III. We’ve had additional offerings in the secure comms arena coming online. I talked in the comments about the development of our Personal Role Radio for US customers and also the Secure Personal Radio for international customers. All of these products are going to help driving incremental growth in fiscal 2008 and beyond. And we have talked previously about the significant international radio opportunities in countries like Pakistan, Mexico, UAE, Iraq, Algeria and these are all starting to come in to focus. I think it’s premature for me to provide a specific number on that trend line, but I am feeling very positive and confident in our ability to continue to grow that business and continue to gain market share.

Okay, great thanks, that helps a lot on the broadcast segment, as you look what happened in the quarter and how you have adjusted the outlook going forward, what surprises you most about the negative changes that you made first of all and second of all on the transmission side do you have a percentage in terms of how many stations still need to go through additional infrastructure build out to get to either full power or the redundancies that they currently possess on the analog side.

Well, on the first part of your question I would have to absolutely say that the weakness in the TV transmission business was not expected when we put together our plan for the year and the order magnitude of that decline, $25 million or thereabouts is about a $100 million business base. So it’s a significant number. We should have perhaps in hindsight expected the take up of mobile TV to go more slowly, that’s not a question of “if” in my opinion, it’s a question of when. We are very well positioned and I would tell you that the slower adoption in the market has caused us to gain a lot of ground on competition over that time frame. I am surprised about digital TV. We still has to make there -- $250 to $300 million of transmitters that should be purchased in order to fill out the complete capability for broadcast including redundancy. Now whether they will put all that redundancy and by the February ‘09 date or not is hard to say, but we continue to be disappointed at the rate at which they are ordering. We are out communicating with customers Chris, that there is only so much capacity in our factory, we are not going to increase capacity to handle a big spike and I am optimistic at some point that’s going to start loading up the factory, but we felt it was prudent at this point to revise our outlook in that part of the business and because those are very high margin products at the gross margin line. It had a major impact on our profitability expectations for the year. The reason I want to go through the detail in the four different product areas within broadcast is that the some are clearly on track. One or two odd and I think its important to understand some of those moving parts which we understand they are -- complicated for you all to understand because we’ve just reported the segment level normally.

Okay, great thanks and nice quarter guys.

Next we will hear from Joe Campbell of Lehman Brothers.

Yes, good evening, its and actually (inaudible) good quarter.

Thanks Carter, how are you.

Doing just fine and I wondered as the RF communication segment continues to just be as impressive as it can be and I wondered if you can characterize as we look forward in ‘07 and ‘08, there seems to be a slowdown in both the army’s and the marine corps’ demand for more equipment and I wondered if you can characterize the capacity in RF com and if there is any way that we run into some sort of capacity constraints out there because these levels are quite high and very impressive.

Yeah, its Bob Henry, let me take the question. From a capacity standpoint I think already we’ve told you that we have made investments up in the RF area from a facility standpoint and from a line stand point. We continue to look at that and surely can make more investments if we need to going forward. At this point in time we see no constraints on our ability to produce at the quantities that we are anticipating that the DoD, so all of the services will need going forward. So we don’t see any constraints at this point in time.

You might recall, we put on a fair amount of capacity in advance of launching the Falcon III handheld and we feel like this is a real competitive advantage that we have by running this as a commercial business and we are willing to make those kinds of investments and I think you see from continued results that its paying off and its generating very good returns for the capital that we are investing in the business.

Yes, I mean it’s certainly impressive, I wondered if you might have any comments on with respect to cash deployment I mean, it seems the financial position continues to improve and are there things that catch your eye or are focuses in terms of cash deployment that we should keep an eye open for.

We certainly have plenty of cash available to fund our internal needs for capital investment and then some, we all use that cash either for strategic acquisitions if we find those that are in fact strategic and can be creative in great value in the absence of that in the long run, we’ll find a way to pay down debts or distributed shareholders.

Great, thank you very much and good quarter.

Thank you.

Now from BMO Capital Market we will hear from John Bucher.

Thank you, Howard, I want to see if I can, maybe take as stab at trying to demystify the perpetual growth you seem to have in RF there. It would appear that, from the standpoint of the overall network effect and the multimode complete solution that you guys outlined before that the Falcon III can provide, that once the Manpac does get fielded you’ll have complete communications capability from command and control down to standard vehicles as well as individual soldiers and marines. I’m wondering, some of the network effect that comes from your being able to field a solution now that it truly does cross what had previously been silos and maybe is that one of the reasons why you are saying this incredible up taken demand and why it may actually still continue or is that you have to be felt. And then secondly with the international exposure is there any chance that you might be able to disclose what the breakdown was between international and US or whether you’ll do that going forward if international becomes large enough, thank you.

While I certainly think you are right on target in terms of some of the excitement that is generated by the demonstrations that we do. We have very quickly transformed ourselves from simply being viewed as a limited focused high frequency radio supplier in to a supplier of a broad range of products and systems across the net. And we continue not just to talk about that but when we can do a demonstration that has vehicular radios, it has manpack radios, it has handheld radios, it has prototype individual Personal Role Radios, all being able to pass this huge amount of content across the network simultaneously utilizing our own internal developed wide band ad hoc way form that’s impressing our customers. These products are largely available today or let’s say within the next year where the services would have to wait 2010, 2011 perhaps if these products are developed under the JTRS program. So this certification and stamp of approval, if you will from the JPEO for JTRS was extremely important and has been viewed as a very significant move by our customers. On the international side, we will be in 2007 I think orders will probably be around 60, 40, maybe a little higher than 60, 40 with the higher number being US government customers. But in absolute terms, the international order rate will grow over last year and revenue will grow over last year. As you have heard me say before I think this is -- there is a wave out there for international that will follow on with the US and while I can’t be specific on which country will buy when, there is a lot of demand. And we have seen it too many times to believe it will be anything other than that, that there will be follow-on business and adoption of these technologies in allied countries that the US adopting. So all of these things are causing us to feel, as I think you can tell pretty optimistic about 08 and beyond for RF as well as for the rest of the company. It’s not the only part of the business that’s growing. We really have a lot of things, a lot more working well rather than not, and in any good size business you are going to have a couple of hiccups in the quarter, but overall we feel very positive about our ability to continue to grow the top line of the corporation and continue to expand earnings.

One last question, the Falcon III availability date, the manpack date that you gave, is that for both the standard manpack radio and the high-capacity data radio, will both those radios be available on that date?

We are not certain. I know what it is for the manpack and the large getting item for that is NSA certification. We think it’s important they certify it. We could be in production sooner, but we are going to wait until they certify to go in a production. And clearly that will be a good growth driver for 2008 force.

Thank you.

Now we’ll here from Joe Nadol of JP Morgan.

Thanks, good afternoon.

Hi, Joe.

Hi, I guess to just start on the Broadcast side Encoda, is the legacy in Encoda business is where you are seen the $15 million hit, is that accurate?

Well, the answer is yes and no. We had an automation business as well as Encoda had an automation business. So within software there is kind of two pieces, there is the software that runs the master control in an automated way. We had expected growth this year. The business isn’t declining, but we are just not seeing growth in that product line. The other part of the product line is the airtime sales, scheduling, and billing software which came from Encoda. We have now refreshed that and what we call the H-Class product line. And then we added in the OSI focused on US station group customers. Again that business isn’t declining but it is relatively flattish for this year. And again you have to also remember the business model we run there, we -- instead of selling licenses we essentially rent the software to a customer. So we make it a five-year order worth, let’s say, $25 million but we will build that in revenue $5 million a year. So it doesn’t drive revenue growth in the year as much as it builds your contract backlog and creates this wonderful good margin annuity going forward. The biggest disappointment in all of that, really again is not a decline but we had hoped that IPTV market as materialized will allow us to wrap software and some hardware around those implementations. And AT&T, one of the domestic leaders, has talked a lot externally about again not if they are doing it but when the rollout schedule and is just moving a little slower. So we are still going to have growth in the overall division this year this year but not at the rate that we had hoped. I still think the business is solid, is going to see accelerated growth again in ‘08 and beyond.

Okay, do you feel like there is a competitive issue if someone come with a competing solution to H-Class or simply and purely a market phenomena?

I believe it’s a market phenomenon, that doesn’t mean that we don’t occasionally lose deals but I talked about our (inaudible) and a couple of others that I couldn’t disclose to the customer. Those were absolutely head-to-head shootouts with competitors that had been winning and instead we are now winning. So I actually think we turn the tide in the market on those product lines. Things never improve quite at the rate that you hope. We never like to take guidance down on any aspect of our business certainly, but we’d rather try and be candid about the path we are on for this year. We took three of the segments up and we took one down.

When you think about the Broadcast sector big picture, it’s where you have been focusing all your or the vast majority of your capitals --

Yes.

-- and sequential acquisitions.

Yes.

And you have a couple areas -- I mean you have sort of what seems like a one-time execution issue because of supplier, the availability of components but you have a couple areas where you have demands on a little short, do you see -- I mean this is a lower visibility business it is clearly on the defense side.

Yes

Do you feel like, I mean how do you sort of balance the lower visibility and the fact that you are putting in, this is where again you are targeting your acquisitions and on top of that where are you today, you didn’t make any acquisition this past quarter, what are your thoughts today as to the future capital going into this area?

Well, clearly both of our commercial businesses, Joe, are not going to have that kind of backlog entering a quarter, the kind of visibility as a defense side. On the other hand, they offer significantly higher, I believe, long-term inherent growths rates because of the global market they serve. And they offer a significantly more margin expansion opportunity. I mean we are at 270 to 280 a share non-GAAP this year with Broadcast a barely in double-digit return on sales and Microwave is still slightly below double-digit. That says there are significant upsides as those margins do continue to improve. I still believe strategically broadcast are very good place to invest and as there are additional strategic acquisitions available at reasonable prices that which fill out our portfolio, I think you would see continued investment there. Having said that, they got to be strategic and they have to be reasonably priced and we can’t say as to whether those opportunities will occur and exactly when they’ll occur. But the Leitch acquisition is been a good one. We really now have this broad and wide solutions offering and just gave a few examples in the call of how those are-- that capability is turning into real orders and I really feel like we are just getting started in terms of really making that a realization of all of these capability we have. So, you deal with the issues as they emerge but I don’t want anyone to get the impression that the business is broken and going in the wrong direction. We are making improvement and there is more right than wrong but, have a little patience I think the returns in this business are going to be good and we are going to look back a few years from now and be very pleased about the investments that we made. Time will tell but I still believe that way.

Do you think there is some of the -- weakness in some of the end markets is presenting any kind of opportunities with regard to pricing and some of the acquisitions you might be looking at.

Potentially.

Okay, and then just one more, on the budget looking at the FY07 budget and the bridge, and it always very difficult to find all the radio funding, it looked like in the base budget the numbers, where may be a little disappointing, in the bridge looks like the marine corps got pretty well funded and the army didn’t. I guess thoughts on how we can kind of interpret all this data.

There is lots of moving parts I think is the answer. There has been a lot of so-called reprogramming of dollars, all the services seem to have a fair amount of flexibility and working with Congress on reprioritization of needs and while you are correct, some of those line items weren’t as big as they had been or as big as maybe even requested. But in fact so the orders have exceeded some of those and so, I really think, while that’s interesting information, it’s really all about the prioritization of the spending. We still believe that communications will continue for sometime to be -- one of the top one or two or three priorities information transmission to the soldier in the field is just critical in terms of them getting intelligence and data to maximize their impact, minimize their casualties and I just don’t see that changing in foreseeable future. Certainly we continue to work hard as our customer and making sure that funding is there. We can guarantee funding and I don’t have a crystal ball into government fiscal year ’08 or beyond. But I am absolutely certain that the demand is going to be there. And based on everything we’ve seen the funding is still tracking.

Okay thanks Howard.

Thank you.

And Ms. Padgett we are at the one hour mark, we still have some more questions in the queue.

Let’s continue please.

All right, we will be hearing now from Steve Mather of Sanders Morris.

Thank you good afternoon.

Hi Steve.

Hi, well first off, congratulations on your execution, sometimes this proves elusive for some other companies. but you seem to have that clearly under control.

Thank you, we set pretty high expectations so, we don’t even like to stumble a little bit.

Right, there is one area that’s interesting to me and that’s the positioning I mean in each segment you have a very interesting story. Do you think its back a year to -- and then basically why we expect that to continue long, because you really have done a unique job, I mean some firms can execute but you have also positioned yourself in a pretty unique way across a couple of different segments pretty successfully.

Well, it’s an ongoing process, we have put in place a pretty rigorous strategic planning process in the company I would say. I think it’s improved every year. I think the engagement from the operating divisions is higher than it’s ever been in our company on driving future growth. And I think that our operating executives realize that to do that it’s not just doing things right. But it’s doing the right things. So we spent a lot more time talking about markets and customers and position in markets and scale and competitive advantage and differentiation and I would like to think that the sum of all those with the efforts of the top 40 or 50 executives in the company is what you are seeing in the results be it in strategic acquisitions, be at in our new product development priorities or be it in our geographical focus not just in the US but around the world. It’s a never-ending process though because competition doesn’t sit still, they react which forces us to react so. Its not anything that you ever done with but thanks for your comments I think we are doing better and its that whole process that convinces especially Gary and Bob and I that even though we had this tremendous success and growth over the last four years, there is still so much more opportunity out there and so much more that Harris can take advantage of regardless of the climate of markets. So the climate of competition, we have big markets we serve. We have wonderful technology to go after that and we really have strong customer relationships. So I would like to think there are even more opportunities going forward for us to have new strategies and then hopefully to execute.

Thanks.

Now we will hear from Byron Callan of Prudential equity.

Yeah, thanks. Howard just a clarification, in you are opening remarks did you say that the 2007 orders per RF would be about a billion dollars and the backlog about 700 or.

Yes, that’s correct Byron I said that based on the strong start in the Q1 with RF orders and our expectations in visibility we think we will once again in ‘07 as we were in ‘06 be a above $1 billion in new orders in RF and that given the backlog, we started the year at -- that order outlook and the outlook that we provided for revenue growth of up 30% to 35% that will end up the year with $700 million or more in ending year backlog which than sets this up for growth in a way.

Okay, good, and then how many -- I mean it just -- it really got back to Chris’ question and its clearly been something that’s been on my mind for a while with Harris, but when you look at the total market you guys do the investor conference and I think you laid out a range of. They were either sized in terms of dollar amount or in some cases radios, but it look like it was $2.5 billion to maybe $3 billion in opportunities, you recognize there is some international opportunities are out there but when you run at this billion-dollar run rate I mean is there just that much more that you are seeing that you haven’t really been able to identify but you are clearly very confident about this business. And I’m kind of trying to square that with what came out in the market investor meeting and the markets that were identified at that that time.

Well, it’s a very good question, Byron. And you are right we did size the RF market at around $3 billion. I think what sets us apart in our Government businesses not just RF but also GCSD from many other players has been two or three things: number one, our ability to gain market share.

Right.

So it’s not just the size of the market at how it’s growing but we have shown a consistent ability to gain market share. Second, we have shown the ability to change the size of the market by introducing products that move us into new segments. Whether it is the SINCGARS replacement market which where we are not a player in, whether it’s the handheld multi-band market which we were not a player in, whether it’s secure communications products, which we are becoming a bigger player in, whether it’s going forward with Personal Role radios. Whether it’s international where frankly we were player in HF but not much else and now we are selling and believe we can lots of additional radios. So it’s this combination affect of the market having good growth. But gaining market share as a result of the strategies, aimed at customers and segments, and expanding the size of the market. The other thing I think that differentiates us over in our Government Systems integration business is we are not totally dependent just on DOD and intelligence. We have a large and growing information technology business and developing solutions for customers like the FAA and the Senses Bureau. And providing ongoing support services for people like the NRO and so you know, even though we are not the biggest, we are very diversified in that business and that, plus our operating really as a commercial business in Europe division really do set us apart a little bit from other companies. I think that sometimes you know, because we are a multiple division companies, sometimes it takes little more work to understand us as opposed to a pure play company. But sometimes we also get lumped all things that are going to slow down, the low single-digits in defense. And we just don’t see that for our company and quarter-after-quarter, year-after-year so far at least we are demonstrating that with our results and we hope to be able to continue to do that going forward.

Okay, yes -- no I was just really specifically looking at -- I understand the total size of the market and stuff, but it was the opportunity set that you guys have broken out. There were a number of slides that showed up, the army to high frequency standardization, for example, around 400 million. That’s kind of what I was driving and I understand the total size of market, I was looking at the opportunities set that you guys have identified back in March and its sounds like that’s expanded. I’m just trying to figure out where it expanded in relative to your base line that we are set last march. I’m going to follow up with if you want you know offline, but --

Well, I certainly think your point there at the end is the right one, that’s you know a lot changed in the last six months. And clearly some of this market opportunities have gotten significantly larger and funding is available that has enabled that, I anticipate as we go forward and give our next investor briefing or some various presentations we are going to be doing at investor conferences that -- we will spend sometime talking about our view of that market today versus a year ago, so we can help to make that a little more clear so thanks for the question.

That would be terrific, thanks a lot Howard.

Operator, take one more question.

Yes, ma’am our last question will come from James Mcilree with Unterberg, Towbin.

Thank you, Howard the IPTV slowdown you are seeing is that just domestic or international also and then secondly is there any intention to get in to the Apco market as -- with the stand alone radio?

Our visibility in the IPTV is pretty global. I think we are seeing but we are probably more concentrated in the US and where we had expected to see growth from that new market, with more in the US Jim, so hence my comment on AT&T. So we were pretty focused on the US. I’ve read some reports from other companies that serve that more broadly around the world and I think that everyone believes its going to become reality but it is also every capital intensive kind of like 3G investments. I think some people are trying to prove out the business case before they get to far head of themselves. So I know there are some international slowdown as well but the impact on us was largely domestic. On your later question all I can say is that it’s a market we continue to watch. We think this link between the military radio and government, federal government capability to communicate with state and local is hugely important. Right now we think we can participate in that at the federal level, we continue to look at the state and local level but at this point that is not a market that we are going to enter.

Great, thank you every one for joining us today and I am sorry we didn’t get to all of our questions.