Good day, ladies and gentlemen, and welcome to the Second Quarter 2009 Insight Enterprises Incorporated Earnings Presentation. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Ms. Glynis Bryan, Chief Financial Officer of Insight Enterprises. Please proceed.

Welcome everyone, and thank you for joining the Insight Enterprises conference call. Today, we will be discussing the company’s operating results for the quarter ended June 30, 2009. I am Glynis Bryan, Chief Financial Officer of Insight Enterprises, and joining me is Rich Fennessy, President and Chief Executive Officer. If you do not have a copy of the earnings release, which was posted this afternoon and filed with the Securities and Exchange Commission on Form 8-K, you will find it on our website at www.insight.com under our Investor Relations section. Today’s call, including all questions and answers, is being webcast live and can be accessed via the Investor Relation page of our website at www.insight.com. An archived copy of the conference call will be available approximately two hours after completion of the call, and will remain on our website for a limited time. This conference call and the associated webcast contain time-sensitive information that is accurate only as of today August 5, 2009. This call is the property of Insight Enterprises. Any redistribution, re-transmission or rebroadcast of this call in any form without the expressed written consent of Insight Enterprises is strictly prohibited. In today’s conference call certain non-GAAP financial measures will be referenced as we discuss second quarter 2009 earnings and diluted earning per share results. You will find a reconciliation of these non-GAAP measures to our actual GAAP results posted on our website on the Investor Relations page. These non-GAAP measures are used by us to evaluate financial performance against budgeted amount, to calculate incentive compensation, to assist in forecasting future performance, and to compare our results to competitors’ financial results. We believe that these non-GAAP financial measures are useful to investors because they allow for greater transparency, facilitate comparisons to prior periods and competitors’ results, and assist them in forecasting our future performance because we typically exclude items we believe to be outside of normal operating results. Finally, let me remind you about forward-looking statements that will be made on today’s call. All forward-looking statements that are made on this conference call are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are discussed in today’s press release and in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2008. With that, I will now turn the call over to Rich to walk you through our second quarter 2009 operating results.

Thank you, Glynis. Hello everyone thank you for joining us. We are pleased to be here today to report on our second quarter financial and operational results. Despite the challenging demand environment for IT products globally, it resulted in year-to-year decline in sales and profitability in our business. We are pleased to report that we executed well in the quarter. For the first time in seven quarters, we saw sequential quarter organic growth in our North American hardware category in both sales and gross profit. We also took further action to reduce the cost base in our EMEA and Asia-Pacific businesses to better align those businesses with the current demand environments. In addition, we continue to focus on improving our cost efficiency metrics and strengthening our overall capital structure. Highlights of our results include, consolidated net sales for the second quarter were $1.04 billion, down 26% from last year, but up 9% sequentially. Gross profit declined 26% to $147.8 million while gross margin was 14.3%, down 10 basis points from last year. Net earnings from continuing operations were $16 million, and diluted earnings per share from continuing operations with $0.34 before the effect of the following one-time items. Severance and restructuring expenses of $2.1 million, $1.5 million net of taxes and professional fees associated with a trade credits investigation that was concluded in mid-May of $2.6 million, $1.6 million net of taxes. On a very positive note we generated over $95 million of cash flow from operations during the quarter. Pay down debt by $51.5 million and end of the quarter with a $119.5 million of debt outstanding, which is down over $100 million since the beginning of the year. Moving onto our operating segment. In North America, net sales were $714 million, down 25% from the second quarter of…

Thank you Rich. Starting with cash flow, in 2009, we have been highly focused on improving our operating cash flow metrics and paying down debt to ensure we have the financial flexibility to grow our business as market conditions improve. In the second quarter, our business generated over $95 million of cash flow from operations with positive contributions coming from improvements in our DSO and DPO metrics for the quarter. As Rich mentioned earlier, we paid down debt to by $51.5 million in the second quarter and ended the quarter with a $119.5 million dollars of debt outstanding. We’ve also ended the quarter with a $120 million of cash on the balance sheet of which approximately $114 million with residential [ph] of foreign subsidiaries. Subsequent to quarter end, a material portion of this foreign cash balance was used to make a large scheduled payment to a supplier that historically would have been made in the June quarter. In addition, because of routine seasonal working capital needs, the third quarter of each year typically requires a greater use of cash in our business. As a result of this dynamic and the scheduled timing of a similar supply payment in the U.S., we currently expect that our debt balance will increase by up to $80 million as of the end of the third quarter. However, we do expect to end the year with a debt balance below the seasonal spike as we continue to realize the benefits from our cash management initiatives. Also of note during the quarter, we were able to conserve approximately $5 million of cash as a result of a favorable settlement of an arbitration proceeding related to the 2006 sale of a subsidiary. Moving on to our capital structure, as we have discussed previous calls, we have a…

We continue to believe that with demand levels where they are today, and with the resource and other actions we’ve taken over the last several quarters, that diluted earning per share from continuing operations will be between $0.80 and $0.87 for the full year of 2009. However, given the typical seasonality of our software business, and our anticipation of continued softness in the EMEA market, we now believe that diluted EPS from continuing operations in the second half of the year maybe lower than the first half of the year. This outlook does not include the impact of any severance and restructuring expenses. Expenses associated with the restatement investigation in administration or related litigation or other one time charges. Overall, we are pleased with our first half operational performance in this challenging new demand environment, and believe we are well positioned going into the second half of the year to compete aggressively. That concludes my comments and we will now open the lines for your questions.

(Operator Instructions) Your first question comes from Brian Alexander - Raymond James.

Rich on your annual guidance, just want to make sure I have this right. If you are reiterating $0.80 to $0.87 and the second half is going to be lower potentially than the first half, and I’m sure in the first half you did $0.42, but maybe there are certain charges that I’m not factoring in correctly, so I just wanted to see if that is the case that you did $0.42 in the first half and the second half is going to be lower, I guess I don’t see how you would be able to do more than 84 and I would expect the range to be 84 or lower?

Yes, Brian actually if you do the rounding in the first half, the first half is actually $0.43 versus $0.42. So, on the guidance of $0.80 to $0.87, which as you know is the same guidance we gave on the last quarterly call. Included in that is now an assumption that typical seasonality on the software business in terms of, as you know the third quarter will be the lowest quarter of the year relative to software, and then the new news relative to last call is the European marketplace is continuing to be quite soft, softer than we had anticipated last time because as you remember on our last call we said we anticipated the second half of the year to be greater than the first half. Two things that drove us to position it the way we position it, one is we had a very strong second quarter, which is good news, and two is the EMEA marketplace is softening and we are concerned about that going to second half of the year, which is why we are trying to be more aggressive as it relates to our cost structure.

That’s helpful. I appreciate the color on the first half as well. So, as I look through the press release and listen to the call it just seems a little bit different in terms of transparency and disclosure, specifically around product mix breakouts, hardware versus software versus services, which in the past was always helpful given the different growth rates and margin dynamics associated with each of the segment. So I guess I’m just curious why pull back on that disclosure. You did provide some additional color on the call but it was a little hard to follow in terms of whether trends were sequential or year-over-year. So, I guess, the first question is why not provide that in the press release specifically around your initiatives in software services and networking, and is it possible to just give us on the call the revenue breakdown by category?

Sure. The interest in terms of the change that we made was not to go to decreased transparency, but more adequately reflect in our release as to kind of how we look at the business. We look at our business not necessarily, I mean not that we don’t look at the sub details of all of the hardware categories, but we really look at our business as a hardware, software and services business for those these categories. So you can anticipate, as we go forward, to bring back something to disclosure that lays out hardware and software and services specifically as categories because again that’s how we are running and managing the business. Let me give you those numbers right now to see you have a perspective on that, and by the way they are in the 10-Q for the second quarter. So there is detailed data there. But, going forward, we are planning on breaking out hardware, software and services in revenue terms, and eventually even GP terms to get a sense for how the gross profit contribution is migrating as we continue to go drive, specifically the services aspect of our business. But let me give you some more details. If you look at our year-to-year performance in hardware, in North America it was down 27%, software was down 29%, services was up to 24% that we referenced in the call, that supports the overall view that our North America sales are down 25%. As it relates to EMEA, in constant currency terms, which I think is a more appropriate way to go think about the business, our hardware was down 8% year-to-year, our software was down 15% year-to-year, and our services business was up 30% year-to-year, which is down the negative 12% in constant currency terms. In Asia-Pacific, which is mostly just software, that was down 29% in US dollars and 15% in constant currency on a year-to-year basis.

That’s very helpful. Just lastly, and I’ll get back in the queue. As you think about your services business, and you had good growth in both North America and in Europe, could you kind of boil it down for us in terms of what specific services are you seeing a lot of success in, what specific services make up the majority of that revenue strength, because it’s such a big category, and I’m just trying to get a better sense for where you guys are gaining traction? Thanks.

Sure. There is really three major buckets relative to our services business. One will be called life cycle services, one of our biggest differentiators in the US today, as an example, because we have about 750 or so field services resources across the United States who are on site daily at clients doing IT projects for them. Specifically, when I say life cycle services, that is helping our clients to manage the life cycle of the IT asset in our environment. That everything from initial deployment of that IT asset, in terms of getting it to the locations they wanted to get it to, the setting up of those IT assets, and then eventually the disposal of those assets when they become old and new needs to come in there. So we referenced in the script, just to give an example, of two engagements we had in the quarter that we are quite excited about. One is, our clients deploy upgrades from a technology perspective in their branch offices, so we literally have resources in each of those branch offices after we consolidate and do all the image loading in our Chicago facility, we ship all the assets in the branch offices, we set them up, we configure them and then we move out and take the old assets with us, that’s an example of life cycle services. So think about it as helping manage the flow of assets for our clients. Another example that we quoted on the script was, we laterally built the networking infrastructure in our labs in Chicago for a large, large crew ship that was being built. We built the infrastructure, we burned it in for six months, we then box it all up and send it overseas to be installed on the actual ship.…

(Operator Instructions) Your next question comes from Matt Sheerin - Thomas Weisel Partners.

Rich, if you could talk about the hardware trends that you are seeing in North America. You talked about that sequential growth, could you talk about end markets, SMB versus enterprise product areas, and then also the trends you see going into September in the back half for the year in North America?

Sure Matt. Thanks for the question. As you think about the hardware category, obviously we talked about the sequential growth that we saw, 13%. I would tell you where we are seeing, which is a little bit different than what I am reading in terms of some of our competitors, we’re seeing strength coming strongest from our SMB business in terms of sequential improvements, as well as year-to-year improvements, because quite honestly I think we’re fixing some of the things that we got broken inside of that business. So, SMB is a key contributor to our growth as well as public sector is a key contributor to our growth. Enterprise is kind of the laggard in terms of sequential growth as well as year-to-year performance, which I think is tied to the overall market environment. All of them helped in the sequential growth, but actually we are getting more of the sequential growth coming from our SMB business in public sector versus enterprise. Relative to the overall demand trends, clearly we are pleased with the sequential growth in 2Q versus 1Q, and as we referenced in the script, we talked about the market stabilizing, what does that actually mean, I mean clearly if you look at that sequential growth, I think two things drove it. One is I do believe we are executing as a company better, and two is I think companies are spending more money in IT in 2Q versus 1Q. We believe that level of spend that we saw in 2Q will pretty much carry out into Q3 and Q4. So, as we think about our business coming out of the market situation that we’ve been through, we’re starting to think of our business on a sequential basis. We overall view that the demand environment in terms of how much spending is going on in 2Q should hold out relatively consistent in Q3 and Q4 relative to our hardware business. That’s the North America statement. Clearly, in Europe where it’s not seeing, we didn’t see the sequential growth as well as we don’t anticipate necessarily sequential improvements in Q3 and Q4, we think that market is going to be slow in kind of like we saw in Q2 continued through the second half of the year.

On the software side, do you think that will remain soft until we start to see the adoption rate for Windows 7.0 start to accelerate into next year?

Yes, I mean I do believe, I mean as you look at the software category, clearly, we experienced the impact of the program changes that we’ve talked about on these calls before, pretty much the expectation that we had. But we also saw lower renewals as well as just lower number of new agreements being put in place. We do anticipate in terms of how we looked at that guidance that that trend continues through the second half of the year, so we don’t see material improvements relative to software business, obviously we would love to see it happen, and we’re obviously focused on trying to go make it happen, but our assumption is it’s going to plays out that way for the second half of the year. Clearly, to think about the category, I am optimistic as I think about Windows 7.0, specifically talking about the Microsoft business we do, and the other product line refreshes as well as new enhancements that are coming out between now and say mid 2010. So I’m hoping that does act as a catalyst for renewed interest and growth, again in the overall software category. One of the points that we’ve talked about, and I just want to give some clarity on, one of the things we talked about that may have happened in second quarter, is some of our transactions in our software business, specifically around Microsoft may have gotten deferred higher than typical, because of Microsoft year-end being July 3, versus ours being June 30. I just want to let you know how that played out. We actually were very successful working with Microsoft to get our transactions prioritized and executed in the second quarter. So it met our June 30th deadline. So, we did not see what we thought could have happen which is a transactions more so than normal moving into the third quarter.

Just back to the hardware commentary, as enterprise volume start to come back wouldn’t that have a negative impact on your gross margin or will service business pickup commensurately to offset that?

We would hope, just what you said would happen, I mean clearly our enterprise business as compared to our SMB business product margin runs at a lower rate. So, right now we're getting some benefit from just the mix change of SMB being greater than it’s been historically as it’s coming back stronger. But over time if enterprise has a big spike that does come with lower product margins, which is why obviously we are as focused as we have been in terms of growing the services business just so that hardware product margin isn’t such a large percentage of the total, and having 24% growth is an example of a strategy that’s working, and obviously our effort will be to continue to go drive that through the second half of the year and get ourselves ready. So, it would be good news from my perspective to see an enterprise spike, and I do believe, when you talk about refresh cycles and not many clients are doing refreshes especially in the enterprise segment, that will change, whether that changes in the first half of 2010, second half of 2010, there is a lot of different points of view on it, but I think we are going to be well positioned to participate in that for two reasons. One is, obviously we have a strong long-term relationships with many enterprise clients. Two is we have very deep capabilities, and what I covered earlier, which is lifecycle services, to help clients deploy and manage the deployment of that technology at a more cost-efficient points than they can do internally. So I think we can go leverage with this refresh cycle that will happen not just selling their hardware but also leveraging their services capability.

Your next question comes from John Lawrence - Morgan Keegan.

Can you talk a little bit about, obviously you cut some cost in EMEA, the process of what you've been able to do in the first half in terms of cost cuts, and as things turn back around, what kind of capital would you need to ramp back up or are you in a pretty good leverage position on cost?

Yes, talking about cost, Glynis might add anything relative to the capital and cash needs associated with that growth. But relative to cost, as you know, it has shown up in our results pretty clearly, all of the hard work to get the cost out of our North America structure is paying dividends, in the second quarter we were down 21% versus the second quarter of last year, and we have been very aggressive there. Relative to EMEA, our cost were down about 2% in local currency compared to last year second quarter, they are down 3% sequentially first quarter to second quarter, so some progress in terms of reducing cost. Some of the things that makes the optics or the actual cost dollars not show up is clearly in terms of, because we actually have taken more action, at the same time we are making some investments. We are making some investments from an IT systems perspective, we’ve also made some decisions in mid-2008 relative to facility upgrades for some of our facilities, those higher run rates are showing up in our actuals now, which kind of move some of the cost reduction actions we’re having just to make it look like we only have a 2% reduction on a year-to-year basis. With that said, as we go into the second half of the year we all know the cost, complexity of getting cost out in some of the European countries is much more difficult than in the US. With that said we’re going to continue to focus on fine tuning our cost structure in the second half of the year to go make sure we are in line to what we anticipate to be the demand environment.

Our next question comes from the line of Brian Alexander of Raymond. Please proceed.

Just on the cash flow, you guys did a great job again on the operating cash flow, and particularly around DSOs, which I know normally would be up quite a bit in the June quarter, although your software business is probably not as strong as you thought. I guess my question is, what should we be thinking about a sustainable kind of annualized net trade cycle or working capital as a percent of revenue, however you want to describe it. I know it's going to move around from quarter-to-quarter, but annually what can we expect to see there and how much more improvement you have left?

I think Brian you have seen so far is that we’ve had cash flow from operations of about $190 million, as I said in my portion of the call, we’re going to be using cash in the second half of the year. So I think from a overall modeling perspective we anticipate somewhere in the region on an annual basis of about 100 or so million dollars in cash flow from operations. Does that help you?

Yes, for the year. But just longer-term, what would your targets be around working capital?

I mean I think that on average what we have said is that we want to be able to generate cash flow from operations that’s in excess of our net income, clearly with our net income at the level that it’s at right now, we are doing significantly better than that. As our net income improves we’re going to actually, and as our revenue grows we will actually end up using working capital. You will remember that in the first quarter for sure we did have sequential growth in the second quarter. We are generating a lot of cash in the first quarter, we started to use a little bit more cash to fund our operations as we started to see some growth in hardware. We would anticipate that we are going to continue to see that going forward in terms of as volumes grow and business picks up, we’re going to have more working capital requirements put on our business specifically from the hardware perspective, and I don't think that we have a target with regard to working capital out there right now.

Brian, let me add one point to your question about DSO, because I do think it’s important to highlight. I mean we clearly are pleased with the improvements we’re seeing in terms just how we are managing our collection processes and our team, I mean they were down two days compared to the second quarter of last year, which is a good thing, and we still continue to see improvement opportunities from a DSO perspective. The overall cash generation is a combination of that effort, which is really sales and finance working closer together, and two is also managing our inventory dollars, you will see our inventory dollar have been reduced substantially on a year-to-year basis. So there has been a lot of focus that’s come out of the market environment we’ve been competing in around our cash management cycle, and I think the progress has shown up pretty nicely.

Then, just given the need for capital, as you reinvest in working capital going forward, and there is the use of cash in the second half, as Glynis just pointed out, just tie into that kind of your appetite for acquisitions and just where you stand on that, and strategically if you were to pursue acquisitions over the next several quarters, what parts of the portfolio do you think you need to enhance the most?

Yes, Brian, we are in the midst of our strategic planning process, in fact we are having meetings over the next month with the Board of Directors doing your typical five year strategic planning. I mean beyond this our primary focus is the organic business, and how we strengthen and improve the organic business. Perhaps opportunistically looking at acquisitions down the road as we scale out our capabilities, some of the key countries in Europe would be clearly a logical place as we think about acquisitions. So, it’s really a secondary strategy versus a primary strategy. Now, with that said, we are in a much stronger capital structure situation than we were say a year ago at this point in time. With that said, that’s kind of how we’re thinking about it right now. As we kind of finalize that strategic plan, and we schedule our upcoming analyst meetings, which will be early part of next year, we will take you through that and we will probably get more clarity on that specific questions of how does M&A play into the strategy.

Just finally on the IT platform, I know you have a couple of quarters removed from the completion of the North American hardware portion of the IT migration. Just remind us and update us on plans from here particularly as it relates to the software business and the networking business that you have acquired?

Yes, no, I mean as it relates to our North America IT platforms, we continue to run SAP for the majority of our business and fine tune and optimize it. We are, as you said, running part of our software business on the legacy spectrum system, and we are running our networking business off the Microsoft Dynamic System. The actual integration of those in terms of timeframe, it’s not anything that’s going to be happening in the short term as we view that, quite honestly the systems are supporting the business quite well today, it does represent an opportunity down the road, but there is no immediate plans to go integrate those systems together into one platform.

Does that at all impede your ability to cross sell, Rich, from an operational standpoint in getting sales people aligned, and just kind of update us on the whole sales force that I know happened not too long ago.

Yes, it does Brian, it makes them more challenging. We believe there is other ways versus just merging this. I mean don’t get me wrong, longer term our plan is to merge into one platform, but the question is just when is the right timing, given the market environment, given the investments and things of that nature. So we will, as we finalize our strategic plan, we will be coming back and crystallizing that aspect of our strategy, but to say that, I mean we are [Inaudible] today, we are seeing some improvements in our business, we’ll be better in one system, I think the answer to that is yes. I think there is other things we can go do, that we are doing to drive improvements without having just one system in our business, for example, common CRM practices across the different aspects of our business, how we compensate people and bring people, and force them together, as well as just how the leadership team operates in the daily management system activity tracking. So, we’ve got activities underneath all those areas to go drive improvements in cross selling so we don’t have to wait for the one IT system to arrive one day.

This concludes the question-and-answer portion. I would now like to turn the call over to Ms. Glynis Bryan for closing remarks. Please proceed.

This is Rich, I’ll help Glynis out on that. Just one point I wanted to highlight. We talked about Europe a lot on this particular call in terms of a softer market and not clearly stabilizing to the extend that we are seeing, the hardware business in North America stabilize. With that said, in local constant currency that team was down in revenue terms 12% versus last year. I think when you compare that to some of the large distributors, European results, and their year-to-year declines in constant currency, I think you’ll find that we executed quite well from a comparison perspective. So that team continues to cooperate in a tough market I believe well, so I just wanted to go make sure aware of that point. In total, as we exit now the second quarter, we are pleased with the improvements we’ve seen in our business. We do believe, specifically in North America, that we are executing better as a team, and we believe the actions were taken out of our cost structure in North America, and we’ll continue to take in EMEA and Asia-Pacific, we’ll continue to allow to go drive towards our profitability goals and achieve the annual guidance of 80 day $0.07 as we go into the second half of the year. Look forward to share with you our success in our third quarter in our upcoming earnings call. Thank you very much for joining.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect, and have a great day.