Good day and welcome to Logitech’s First Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. We will be conducting a Q&A session towards the end of this conference and instructions will follow at that time. This conference call is being recorded for replay purposes and my not be reproduced in whole or in part without written authorization from Logitech. I would now like to introduce your host for today’s call, Ms. Teresa Thuruthiyil, Director of Investor Relations and Logitech.

Thank you. Welcome to the Logitech conference call to discuss the Company’s results for the quarter ended June 30th, 2009, the first quarter of Logitech’s fiscal year 2010. The press release, a live webcast of this call and accompanying presentation slides are available online at logitech.com. This conference call will include forward-looking statements, including forward-looking statements with respect to future operating results that are being made under the Safe Harbor of the Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from that anticipated in the statements. Factors that could cause actual results to differ materially include those set forth in Logitech’s Annual Report on Form 10-K dated June 1, 2009 available online on the SEC EDGAR database and in the final paragraph of the press release reporting first quarter results, issued by Logitech and available at www.logitech.com. The press release also contains accompanying financial information for this call. The forward-looking statements made during this call represent management’s outlook only as of today and the Company undertakes no obligation to update or revise any forward-looking statements as a result of new developments or otherwise. I would like to remind you that this call is being recorded, including the question-and-answer portion, and will be available for replay on the Logitech website. For those of you just joining us, let me repeat that presentation slides accompanying this call are also available on our website. Joining us today are Gerry Quindlen, Logitech’s President and Chief Executive Officer, and Joe Greenhalgh, Logitech’s Vice President of Corporate Finance and Investor Relations. I’d now like to turn the call over to Gerry.

Thanks, Teresa, and thanks to all of you for joining us. I am going to start with an overview of our performance and then turn it over to Joe to into more detail on our results. I will address our view looking forward following Joe’s comments. Our Q1 results were consistent with the outlook we shared at the start of the quarter. In fact, our sales were higher and our operating loss lower than anticipated with gross margin within the expected range for the quarter. While our sales and profitability weren’t what any of us are used to seeing from Logitech, I was actually quite pleased with the quality of our execution during the quarter. We did a very effective job of reducing our operating expense, managing our working capital and helping our channel partners reduce their weeks of supply level through promotional activities and reduced shipments. I do want to emphasize that as we saw in the March quarter consumer demand for our products in Q1 did not decline anywhere near as much as the 36% decline of our revenues. Let me share with you sell-through on our top five geographic markets, which comprise more than half of our retail sales. In the U.S., our largest retail market, our sell-through in Q1 was down by 10% compared to the prior year, a slight improvement from the 11% decline we saw in the March quarter. In Germany and France, we experienced a 3% decrease while in the U.K. our sell-through growth improved to 19%. Furthermore, sell-through was up by 10% in Canada, a significant improvement over the steep decline in the March quarter. Sell-through at a product category level in Q1 was also relative healthy across many categories. For example, looking at the Americas, sell-through of Mice was down by…

Thanks, Gerry. I’ll start with an overview of our Q1 sales performance. Please note that the growth percentages that follow are in comparison to Q1 fiscal 2009. Our retail sales fell by 35% with units down 23%. Sales were down by 39% in EMEA, by 37% in the Americas, and by 22% in Asia. The weakness in EMEA’s retail sales was spread across all major countries and reflects the combination of weak demand and our accelerated efforts to help our channel partners reach their new weeks of supply targets. Looking at our regional sales in local currency, the decline was 32% in EMEA and Asia was unchanged at 22%. Let me supplement the country specific sell-through data provided by Gerry with the regional sell-through data. Sell-through in local currency was down by 17% in EMEA, down by 10% in the Americas, and sell-through was flat in Asia. Our Sell-through was relatively stable in our largest markets in EMEA. We experienced steep sell-through declines in several middle tier markets, including Spain and Italy. Similar to the March quarter, our sales performance was weaker than our unit shipments in all of our retail product families. The resulting 15% in our overall retail average selling price had a negative impact on our top line performance. Difference between our sales and unit performance was driven by a combination of the consumers’ continued strong response to aggressive promotions and a shift to lower price points across all product families. Sales of our products priced above $100 represented 12% of our retail sales in Q1 compared to 19% in the prior year. The move to lower price points was most notable at ASPs below $60 as their share of the total increased from 62% last year to 75% this year. It’s important to note that the…

Thanks, Joe. I want to comment now on our outlook and our plans going forward. Let me start by saying it’s great to have Q1 behind us. We projected that Q1 would be the low point of the year for our operating results and we are on track to deliver improved performance throughout the remainder of fiscal 2010 starting with the return to profitability in Q2 and a return to earnings growth for the second half of the year. One of the key reasons for our confidence in improved performance is our exiting line-up of new products most of which we plan to launch this quarter. As you would expect, we will introduce a variety of new offerings across all of our product categories that are targeted at the needs of today’s consumer. Let me briefly highlight several of them. Last month, we launch Logitech Vid, a free, fast and easy way to make high quality video calls using a webcam. Vid dramatically simplifies video calling by offering a streamlined setup and a simple intuitive interface. While video calling has been around for more than a decade, our research revealed that the biggest reason why people don’t make video calls is that they are frustrated by complex software and confusing setup procedures. With Vid, which was designed exclusively for video calling and is powered by the Logitech SightSpeed network, we’ve eliminated these major obstacles to making video calls while still providing the exceptional quality audio and video that our customers expect from Logitech. We have been very pleased with the initial reaction to Vid. In spite of it not yet being bundled with our webcams, there were still over 400,000 downloads of the software by current webcam owners since the June 17th launch. We have several new webcams coming in…

(Operator instructions) And our first question will come from the line of Jonathan Tseng with Merrill Lynch. Please proceed. Jonathan Tseng – Merrill Lynch: Hey guys, Jonathan Tseng here. Just want to understand the cost evolution. Previously you talked about a $100 million target for cost saving for the year. Does that still hold?

Hi, John, yes, it absolutely holds for the year. And just to be clear that the cost savings was a combination of operating expenses and cost of goods sold. The majority of it would be operating expenses. Jonathan Tseng – Merrill Lynch: Okay. And I think – and that’s based on cost including restructuring charges when I look at the prior year comp, is that correct or is that – you are basing the base cost base excluding the kind of $20 million increase you had in Q4 last year?

Well, I think what we said was we take $100 million out of our cost structure and yes I think will be excluding the restructuring. Jonathan Tseng – Merrill Lynch: Yes. Then there is some break down of the cost lines here. I mean – you did mention the current cost isn’t sustainable, which I think is clear because sales and marketing has to go up during the holiday season especially with new products. I am trying to think of the other lines, particularly the R&D and the kind of G&A lines here, you brought them down, they have been pretty constant the last couple of quarters. Is there anything in there which would seasonally mean they pick up or am I to assume they stay kind of flattish in absolute terms?

I don’t think we are going to – you know we are not going to provide an outlook by quarter for the rest of the year, but I think R&D, there is no reason to expect a significant change there going forward. Sales and marketing, as you already alluded to, we are probably going to be spending more in that area as we move into that higher volume portions of the fiscal year, which is typically starting a little bit this quarter, but then picking up quite a bit as we get into the December and March quarter. Jonathan Tseng – Merrill Lynch: Yes. And in just the G&A line is there anything in there which will mean a seasonal bump to make sure I want to mean bonuses for the managements example a percentage of central cost, central personnel or is that in anyways could be fairly stable, is there more seasonality in there?

There shouldn’t be much seasonality in there. Just one thing to keep in mind about all our expenses if you are thinking about the full year. Our opportunity for savings particularly in the variable cost side are greater in the first half of the year than the second just given the fact that if you compare to a year earlier the economy really started to impact us severely in the second half of the year. So we began to cut back our expenses then during the second half. So, in the first half, I think you’d see more savings from a variable cost standpoint as related to the personnel actions we took and our restructuring that should be relatively linear across all functions. Jonathan Tseng – Merrill Lynch: Thanks so much. Thanks guys.

Thank you.

And our next question will come from the line of Yair Reiner with Oppenheimer. Please proceed. Yair Reiner – Oppenheimer: Great. Thank you. If we look at kind of your experience here in de-stocking it looks like it’s going to take you almost a full two quarters to get the channel inventory back to where you wanted. That’s I think a quarter longer than just taking a lot of consumer electronics companies. As you go back and try to figure out what happened historically, where there mistakes that were made in terms of maybe putting out too much product into your partners and into your distributors and how can you change that going forward?

No, I absolutely don’t think mistakes were made and I don’t think it’s taking particularly long. The reset is consistent or it’s playing out consistently with what we have been saying for a couple of quarters. I think you have to go back and look at the nature of our product categories and back up a few quarters before the global economy really started to slow down. Our weeks of supply at our customers and our channel partners is really based on our sell-through growth rates and our partners were at that time frankly much more concerned about running out of product or not having product on hand than they were the absolute level of inventory. And because we were very consistent in growing their categories they were quite willing to take what I would call inventory risk, much more so with us than with other categories that had slower growth than Logitech. So, when the global economy really started to slowdown and we saw sell-through drop off, we hit a wall pretty hard. And so it’s taken us a couple of quarters. But as we have been saying it’s playing out the way we thought that the channel reset should be complete by the end of Q2. But, no, I absolutely do not think anything – there were any mistakes made. It was – it really was the nature of our business model. And going forward. We expect that post Q2 sell-through and sell-in should move much more closely together. And our real focus will be on generating sell-through again. Yair Reiner – Oppenheimer: Great. Thank you. That’s very helpful. Now, if you look at the gross margin decline year-over-year there is clearly probably four elements, there is some discounting, there is maybe some trade down to lower ASP products, there is effective foreign exchange and may be some negative leverage in manufacturing. Can you kind of go through those four elements? May be there are more and explain how much each of them contributed at least directionally, which of those that are more important in the gross margin contraction over the last few quarters?

I am speaking specifically to what we saw in Q1. I think there is probably three main buckets that I would point to as being roughly equivalent in terms of their impact on the year-over-year decline. The first one is the level of promotions that we’ve seen and those promotions are related both to the channel reset as well as to just the weak level of consumer demand and the need for promotions to stimulate sell-through. I think secondly, you mentioned it, the FX effect, the stronger dollar on a year-over-year basis, that’s had a big impact. And then I think that the – thirdly this wasn’t [ph] a product mix issue on both between product categories and within product categories. I think we talked about the impact that audio, which has done relatively better from a sales standpoint than some of our other categories, but has traditionally been a lower gross margin category for us. So, that’s an example of the impact of product mix. So I think those three, as I said, those are roughly equivalent in terms of their impact year-over-year. Yair Reiner – Oppenheimer: Thank you. I’ll get back into queue.

Thank you.

And our next question will come from the line of Alexander Peterc with Exane BNP Paribas. Please proceed. Alexander Peterc – Exane BNP Paribas: Hi. Thanks for taking my question then. I would just like to understand what will happen with the fact of the OEM evolution with respect to you gross margins, is that having a positive effect in the second quarter from a mix perspective?

Well, I am not going to get into the specific impact of OEM within Q2. I will give you the bigger picture on top line though. A year ago we hit an all-time high in terms of our OEM sales driven the success of our microphone opportunity. As Joe said in his remarks, that’s at the end of its sales cycle, it’s at the end of its natural sales cycle. So we actually expect that a fairly steep decline year-on-year in terms of OEM sales in Q2 driven simply by the microphone opportunity having run its course. We said that OEM is at the lower end of the spectrum in terms of margin impact in our business overall. And that really hasn’t changed. But I am not going to get into the specific impact of OEM in Q2, but that helps you kind of understand what we are expecting from a sales standpoint for Q2. Alexander Peterc – Exane BNP Paribas: And then a just a quick follow-up on your product launches. Are we going to see most of the existing launch ready to happen this year in fiscal Q2 or is there anything major left for the rest of the year?

Well we have new product introductions in every quarter, but the two major quarters for product launches are Q1 and Q2 and Q2 is the largest meaning that the majority of products launch in Q2. But we still have some new things coming out in Q3, Q4 as well. So we are always launching new products, but it is correct to assume that you will see the majority of our new products will have launched by the end of Q2. Alexander Peterc – Exane BNP Paribas: Okay. So thanks very much.

Sure.

And our next question will come from the line of Ashish Sinha with Morgan Stanley. Please proceed. Ashish Sinha – Morgan Stanley: Hi there. Just a couple of questions, if I may. Firstly, on your DSO’s and your working capital performance, I mean, I the current level of DSO’s, is it sustainable or do you think there is a chance it might come back up with your distributor and retail partners kind of nudging you ahead?

Well I think that the – first of all, we are very pleased, we’ve had two quarters in a row of our I think our lowest DSO that we’ve seen ever. It’s 47 [ph] days and I think part of that has certainly been driven by our cash collection efforts. However, I think also a major factor in that is just the environment we are in, an environment where sales are declining double digits, where we’ve got a reset going on with our channel partners’ weeks of supply and I think that those factors are having a pretty big influence. If you look at where our DSO was historically, in a growth environment, which is where we’ve been for most of our history, 47 days probably wouldn’t appear sustainable and I think if we get back, when we get back to a growth environment I think 47 is probably a little on the low side for a sustainable DSO. Ashish Sinha – Morgan Stanley: Okay. And just to clarify on your operating profit guidance, does the $10 million include any restructuring charges in there or is that a clean number?

There is the potential there for some restructuring, but as we said we are only – we are looking at up to $2 million in additional restructuring throughout the remainder of the year. Our expectation is that that will be spread across several quarters. So, I don’t think the restructuring will have a major impact one way or the other. Ashish Sinha – Morgan Stanley: Okay. And just one last question, if I may. On your input and raw materials cost trends, could you talk a little bit about those? Is that a big issue, I mean are you hearing anything or do you – what are your expectations on that front?

I don’t think there is – there aren’t any major issues there. I think we’ve seen some – compared to where we were, going back a year ago, we are seeing favorable trends and we’d expect that if things stay the way they are today that that would be positive factor as we go through the second half of the year, but I don’t think there is anything to be overly concerned about at the moment.

It’s one of the – the improvement in input cost is one of the reasons that we believe – we are very confident saying we’ll see a return to earnings growth in the second half. But as Joe said, the two bigger factors, contributing factors really are the completion of the channel reset and the launch of our new products. But input costs are definitely moving in the right direction and they are definitely helping. Ashish Sinha – Morgan Stanley: Okay. Thank you.

And our next question will come from the line of Tavis McCourt with Morgan Keegan. Please proceed. Tavis McCourt – Morgan Keegan: Thanks. Yes, I think a couple of them, first on your internal inventory, should we still expect that to come down from these levels, are there still any kind of accelerated write-offs happening there or is that at a point where that will start growing again and kind of transition from the older products to the new products? And if you kind of weave into that, what that means for gross margins as you launch the new product should we expect kind of a step-up up to traditional gross margin levels as you kind line through older products and channel resets or is it still too early to say that you can get back to those levels?

Well, Tavis, I think from a inventory perspective given where we are at in the year I don’t think there is any reason to expect any significant reductions going forward and we are heading into the – approaching the second half of the year, which is obviously the biggest part of the year for us. So I think our – I’d expect our internal inventory to behave with the same kind of seasonality that it has in the past from this point forward. As far as the impact of new products on our gross margin and we think it will certainly have a favorable impact I think from two dimensions, one being we’d expect that our new products will be subject to less promotional pressure and then the products that are out there, a product that has got new features and new functionality is going to hopefully be less promotional than one that’s been on the shelf for 18 to 24 months. I don’t think we are in a position to say when it is that we expect to return to the 32% to 34% range. It’s an annual target and as I say, we are not prepared to say when. I think what we would say is that we don’t think that the factors that have pushed it down as low as it is right now, we don’t think those factors are permanent and I think we’ve started to give an indication of that just by our projections for Q2 where we are expecting a significant sequential increase in our gross margin. A big part of that is because we are expecting less promotional pressure both from the completion of our channel partners’ weeks of supply reset and the launch of the new products.

Tavis, I just want to re-emphasize the last point which is in our mind nothings has changed in terms of our business model. We believe that 32%-34% long term range is still valid. It is a long term range. We’ve said we’ll have times – a year ago we were significantly – a little more than a year ago we were significantly above the range. And now we are below it because of the economy and the channel reset, but we believe that our business model hasn’t fundamentally changed and the range is still valid. And we will get back to it. We are not saying when because there is still too much uncertainty in terms of the general economic environment. But we absolutely believe it’s a valid long term range. Tavis McCourt – Morgan Keegan: Great. And then a follow-up. I see on the slide, you kind of show sell-through by region. In aggregate, is it fair to think of sell-through as down about 10% to 12%?

Well we don’t look at it – we don’t really look at a – what I would call a aggregate company sell-through because it’s really not a meaningful number. That’s why we provide it by region and we’ve provided some individual country data as well. And I don’t know if that – the math would lead to that figure. So, I don’t want to speculate. But you can see – we are trying to help you by breaking it up by region so you can kind of see the dynamics. They are very different. Europe is a little different than – what’s going on in Europe is a little different than what we are seeing in the Americas, for example. So I don’t really know if the 10% is right because we don’t tend to look at it at an aggregate company level. Doesn’t really haven’t – it’s not a meaningful number that way. Tavis McCourt – Morgan Keegan: And a follow-up, which may have the same answer but can you give it a sense of kind of what you typical aggregate channel inventory is now, maybe weeks of inventory across all product line, I am sure it differs a lot by product line, but just so we have a sense of where it may have been three, four quarters ago versus where it is today or the end of September?

Yes. You know it’s a little bit like the answer I just gave on sell-through. There is no single level of channel inventory that is typical because it depends on, for example, a retailer’s go-to-market model. In the United States office supply, super stores have a very different model than discounters and discounters can operate off a much lower level weeks of supply target than office supply stores, super stores, I mean to say. What is consistent is that all of our channel partners have been working with us or we are working with them to drive it to a lower level. What I can say is that if you look at where we expect to be at the end of Q2 versus where we were a year ago, and this is a statement about dollar value inventory, we expect that from the September quarter of ’10, the ending value that we expect to be versus September’09 that the value in channel inventory will be down about 40%. So, pretty dramatic. Tavis McCourt – Morgan Keegan: Great. Thanks a lot.

You’re welcome, Tavis.

And our next question will come from the line of` Simon Schafer with Goldman Sachs. Please proceed. Simon Schafer – Goldman Sachs: Yes, thanks very much. I wanted to come back to this debate about gross margin. You clearly outlined that there is really three factors at work in your opinion one of them being FX. But we have seem to have gone through a three-year period whereby FX really wasn’t sighted as any reason for strength. So, I was wondering as to why on the way down that it gets – tends to get sighted as a weakness. And in conjunction with that I can – maybe we can just revisit this debate as to whether and how perhaps lower price point products aren’t necessarily a – leading to a lower structural gross margin, that will be very helpful. Thank you.

Yes, Simon, I think as far as why we’ve talked about FX and the impact of gross margin now versus why we didn’t talk about it in the past, I think that the circumstances are very different. If you go back to where we were in FY07, in FY08 exchange rates changed – the exchange rate changes were much more gradual. To go take a look at our business model, which we’ve talked about in the past, one of those things that we tend to do in response to exchange rate changes is adjust our prices in local currency. When exchange rates move gradually, that gives us the opportunity to do that gradually. It gave us the opportunity – the time to lower our prices in euro. So, I think that that was that environment and the environment we’ve seen since then, if you go back to the fall of 2008 I mean the change in the exchange rates, strengthening the dollar was steep and it was rapid. And it would take us several months under normal circumstances to adjust our prices. However, at the same time, obviously we saw the implosion of world economy and at that point we made the decision that instead of trying to adjust for changes in exchange rates, we would try to optimize our market share. So, I think that’s – in this environment we have chosen not to try to increase our prices extensively in euro in order to offset this. Instead we have decided to focus on market share. So, I think fundamentally we are talking about very different circumstances. And back in – FY07 and FY08 we had the opportunity to respond over an appropriate period of time and that this is just a different environment now. Simon Schafer – Goldman Sachs: Understand [ph]. And as it just relates to the question with respect to price points that will be helpful.

Well, I think that as we said and you’ve already pointed out, some of our best margin products are lower ASP products. Think about a mouse that we decide to launch in 1999. That product is designed with a cost structure that’s designed to support that price point. That’s what I would call a naturally low ASP. Naturally low ASPs for us don’t translate into lower gross margins. It’s when we get to unnaturally low ASPs that we have a problem or at least that we see pressure on gross margin and that’s I think a lot of what’s going on in this environment is that same example, the 1999 mouse. If we have to move that price point down to 1499, to be promotional, to drive sell-through, to help our channel partners reset their weeks of supply, absolutely. That’s going to put pressure on gross margin. I think from our perspective, we don’t view that as permanent. We think that those pressure will ease. We think they are already starting to ease with the weeks of supply reset and so I think it’s – our position that lower ASP products don’t mean lower margins, I think – I don’t think we’ve changed that at all. Simon Schafer – Goldman Sachs: Understand. My second question would be – had to do with Harmony remotes. I think from what you are saying, I think you referred to may be that channel reset as you put it, including remote controls have finished. But just looking at the sales line, that’s obviously much lower than anyone may have expected. And I was wondering as to what sort of drivers there are that would drive that back up. Were there anything specific on the product introduction road map or anything else? And in conjunction with that, is there any risk that any of the goodwill or any additional inventory may have to be written off as part of that business unit? Thank you.

On the last part, Simon, no, we are not concerned about the write-offs. Let me share a little bit – I won't do this with every product category, but I think it’s warranted with Harmony given that it was a very disappointing quarter from a sell-in standpoint. I am going to provide some sell-through data on that specific category. Our sell-through in the U.S., which is still the dominant market for Harmony, was down less than 20%. We are not thrilled about that, but very, very different, obviously than the rate of change in selling. The sell-through in Europe was actually up at double-digit rates. And as I have already indicated in my comments, we gained market share in both the U.S. and Europe. So we continue to do well with consumers in terms of the competitiveness of our products, et cetera. What I would say about Harmony is, as with the Company in general and the statements we’ve made, I believe Q1 was the bottom for remotes. I expect things to improve from here on out. I am not saying we are going to return to growth in Q2, but I definitely expect that we’ll see sequential improvement in Q2 and I believe the second half will be a lot better because Harmony hit – to one of the earlier questions, Harmony probably hit the wall the hardest of all of our product categories. Of our large product categories, it was the fastest growing that we had. It was consistently growing and I am talking sell-through here, 30 plus, in some cases 40 plus percent a year. And so retailers were constantly bringing in stock and were bringing out new products all the time. And so when things slowed down, Harmony hit the wall harder probably than any of our product categories. And we felt the channel reset there more there in other categories. But that said, as with the Company in general, I think Q1 was the bottom for Harmony and I expect things to get better going forward. And the sell-through picture is not nearly anything like what the sell-in picture look like and again that’s consistent with the overall company profile. Simon Schafer – Goldman Sachs: Thanks so much, Gerry.

You’re welcome, Simon.

And our next question will come from the line of` John Bright with Avondale Partners. Please proceed. John Bright – Avondale Partners: Thank you. Gerry, staying with the gross margin discussion, what are you assuming for pricing for this product introduction cycle versus what you may have assumed in the past product introduction cycles?

John, we have product – we have the products at all price points as with every year. We may have a few more products at lower price points than in prior years just to be more tailored to the current economic environment. But when you think about the breadth of products that we introduced, the number of different categories and the number – we have products at every single price point from $19 all the way up to $99 and above. So, there really isn’t a dramatic difference there. So – John Bright – Avondale Partners: Are you assuming that – are you making any assumption that the consumers are going to be more price-sensitive on a number of the new product introductions so that for the new mouse that is introduced. Maybe it doesn’t come out at the same price level that it came out before or are you still making the assumptions that similar pricing will hold?

No, we are not assuming that we need to bring out the new mouse at a lower price point than we would have in a different environment. You know the mouse I referred to in my comments that we are very, very excited about, that product is highly innovative. There is absolutely no reason to discount it. People who are looking for a mouse and who appreciate the kind of innovation that we’ll bring will pay those prices. So, no, we are not assuming that we would have to introduce it at $99 in normal times and because of the environment we need to introduce it at $69 or $79. That’s not our assumptions. John Bright – Avondale Partners: Got it. Last question. Windows 7 is scheduled for release in the October timeframe. Maybe you can talk about hopeful [ph] benefit to Logitech and maybe (inaudible) compared to the (inaudible) impact or past roll outs of Windows software.

Yes. I mean – we are excited in support of Windows 7. We think as with prior Windows launches, we are optimistic that it will have a benefit in the category in terms of getting more people to shop for PCs and shopping for PCs to shop for peripherals. We have a line of products that are Windows 7 compatible and those products are on target and on schedule. And so we’ve seen a positive impact from every launch over time and that’s a key thing. That said, we do not plan or we do not have baked into our numbers what I would call a material impact from the launch of Windows 7. We think it’s a positive especially in this environment where we are looking for ways to stimulate consumer demand. So that’s what we say. John Bright – Avondale Partners: Joe, two questions for you. One-time IT costs in June were they meaningful? And then the second one is what are you expecting for CapEx in FY10?

Yes, hi, John. We are not going to go back and revisit the specifics of the IT cost in the previous year. They were meaningful enough from a G&A standpoint that we mentioned them. But as I said I am not going to go into the details on that and the important thing is they were specific to Q1. We don’t have any comparable issues like that in IT or in G&A as we go through the remainder of this year comparing to the previous year. I mean, I am sorry, the second question was –?? John Bright – Avondale Partners: CapEx expectations fiscal –

I would – I think our long term range that we’ve talked 2% to 3% of sales that’s still appropriate. I would expect in this environment we should be at the lower end of that range certainly than the higher end. Then that’s probably as much as we’d say on CapEx. John Bright – Avondale Partners: Thank you.

(Operator instructions) And our next question will come from the line of` Andy Hargreaves with Pacific Crest. Please proceed. Andy Hargreaves – Pacific Crest: Hi. Just one other clarifying question on the inventory. Is this usually a build quarter for channel inventory so and you guys commentary are you thinking that inventory will fall materially in absolute terms or is that primarily a days of inventory decline that you are expecting for the quarter?

I am sorry, and you are talking about our inventory or channel inventory? Andy Hargreaves – Pacific Crest: Channel inventory.

So your question on channel inventory, would you repeat it in –? Andy Hargreaves – Pacific Crest: Well specifically are you expecting channel inventory to fall in dollar terms or just in days in the quarter?

Yes, the statement I made earlier, the 40% was the statement about channel inventory dollars. And we expect the weeks of supply will be at a lower level. So, we expect both to be down by the end of the September quarter. Andy Hargreaves – Pacific Crest: That’s both year-over-year and sequentially?

Yes, yes. And we mentioned that in Q1, for example in both EMEA and the Americas we were down about 20% in both sequentially. And we expect a further decline sequentially Q1 to Q2. And my comment about the 40% was a September quarter to September quarter comment. Andy Hargreaves – Pacific Crest: Okay. Appreciate it. And then just kind of a follow-up. Probably you guys have done this before, but on attachment to PC sales and specifically Netbooks, PC unit sales have actually held in remarkably strong for the first half of the year and certainly your sell-through hasn’t kept up with that pace. So, can you give us any commentary on what attach rates are on the low-end PCs versus traditional PCs or just how you are thinking about that, is it a function of the mobility of the products or is it just a function of the economy and people are not wanting to buy a big basket right now?

The – our view relative to sell-through is that it’s fundamentally an issue of the economy. Relative to the Netbooks, our position, just to reiterative it is we believe that bottom line Netbooks are a positive for the category and an opportunity for us. I think I have shared this before, but we recently completed a study of Netbook owners in the four largest countries, U.S., Germany, France, U.K., to understand their needs and their current behaviors and we were pleasantly surprised to find out that the ownership of notebook form factor mice among those Netbook owners was in the 50% to 60%. So, we think Netbooks are bottom line an opportunity. We think the other big opportunity with Netbooks immediately is with our PC headset line. And our results also indicates that a lot of Netbooks are incremental purchases. They are not substitute purchases. So – and there are channel opportunity because a lot of them are being sold particularly in Europe through telecommunications channels, so it gives us an additional display opportunity. So, bottom line we believe that there is an opportunity for us, Andy. Andy Hargreaves – Pacific Crest: Okay, thanks. And then – just the last question, are there any big driving games coming out for the holidays that might help you guys out on the gaming side?

Well the big one that we are still waiting on is Gran Turismo 5. We have had a wheel designed for that and that’s been delayed a couple of times. So we continue to be excited about that imminent launch and we think that that will help quite a bit in terms of our – we have a wheel for GT 5, it’s been available for sometime. So, that’s our biggest opportunity. Andy Hargreaves – Pacific Crest: Okay. Thank you.

Thank you.

And our final question will come from the line of Nicolas von Stackelberg with Sal. Oppenheim. Please proceed. Nicolas von Stackelberg – Sal. Oppenheim: Yes. Thanks for taking my question. My first question would be on the financing of channel partners. Has that concern been easing and maybe you could answer that question by differentiating between the various geographies.

I would say that – in general, I would say it’s been easing in the sense that the couple of quarters ago there was concern about Circuit City. There haven’t been any Circuit City very visible retailer melt-downs. The place where partner financing or partner access to credit remains an issue is in emerging markets. And I would say even there it’s eased somewhat but it has not eased completely. But in the major markets, in terms of large big box retailers, there haven’t been any issues or any concerns for us and even with Circuit City. We managed through that I think fairly effectively and we didn’t have any exposures. Nicolas von Stackelberg – Sal. Oppenheim: Thank you. And then a second question, if I may. Why are you not restarting your share buybacks? I mean you have done extremely well in terms of your free cash flow generation in the first quarter, granted the bulk of that came from working capital and we might see that swing back over the course of the rest of the year. But still you have an impressive cash pile and while you did comment on looking at various opportunities on the M&A side I would have thought that there was room to continue the existing program or would you wait for the CFO to come back on board for that?

It has nothing to do with the CFO. So, I will acknowledge that early on in this crisis, we like – I think like just about every good company out there said we are going to prioritize maximizing cash because no one knew how deep or how long this global recession would be and we still don’t see a clear end in sight. So, I think it was the right decision and I will admit that I was conservative in terms of saying that I wanted to make sure that we focused on maximizing cash and that’s one of the reasons we stopped our buyback and I think it was the right decision. We are going to start buying back our stock again. We have $126 million left on the program. The current program – I am not going to say exactly when – you know but I think optimizing our cash in this environment was the right decision but that said we will start buying back our stock at some point in the future. And again – Nicolas von Stackelberg – Sal. Oppenheim: Maybe you could share with us some of the data points out in the market that you are looking for that would make you change your mind and press the button again?

Well, the thing that we are paying the most attention to relative to data points is just what is happening with the consumer and general sell-through. That's something we are -- that will be the strongest signal to us that the global recession is ending, when we see consumers consistently start spending money again and sell-through picks up. But, that's not a trigger. We are not going to, as soon as we see positive sell-through, go out and start buying back our stock. As I said, we will start buying back our stock again. I won't give you an exact timeframe for when. We have been a bit hesitant to do that because we were looking to get a little bit more visibility in the current environment and we have said that Q1 was a bottom. So that's obviously a strong statement from us and we are very confident about the second half. So, it's one of the reasons we are saying we will start buying back our stock again, because our confidence is increasing. Nicolas von Stackelberg – Sal. Oppenheim: Thank you.

Thank you.

That concludes our conference call for today. You may all now disconnect.