Ladies and gentleman, thank you for standing by. And welcome to the Tyco Electronics Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only-mode. Later we'll conduct a question-and-answer session with instructions being given at that time. [Operator Instructions]. As a reminder, this conference is being recorded. And I'd now like to turn the conference over to your host Vice President, Investor Relations, Mr. John Roselli. Please go ahead.

Thanks, Rochelle. Good morning and thank you for joining our conference call to discuss Tyco Electronics' third quarter results for fiscal year 2008 and the press release issued earlier this morning. With me today is our Chief Executive Officer, Tom Lynch; and our Chief Financial Officer, Terrence Curtin. During the course of this call, we will be providing certain forward-looking information. We ask you to look at today's press release and read through the forward-looking cautionary statements that we've included there. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to read through the sections of our press release that address the use of these items. The press release and all related tables can be found on the Investor Relations portion of our website at tycoelectronics.com. Now let me turn the call over to Tom for some opening comments.

Thanks John. And good morning. Overall, we are really pleased with the quarter we just completed. I think it reflects good progress in a number of areas for us. Our sales grew 19% and our organic sales growth was 11%. Our adjusted operating income increased 22% over the prior year and our earnings per share increased 43%. You do have to make it apples-to-apples with last year if you take out our unusually high tax rate in last year's third quarter; our EPS was up 31%, still a good strong showing. We also had another strong cash flow quarter as our free cash flow was $283 million and as announced this morning, our Board has approved the $750 million increase to our share repurchase. So, we continue to have strong financial performance and are in very, very good financial condition. All four of our segments had solid growth in the quarter and three of the four had solid improvements in operating performance. We believe our performance continues to benefit from the diversity of our market mix and our global presence. As you know, it's about half of our business in industrial and infrastructure business, and half of our business in consumer, I think that's a good balance especially in these times. And then about two-thirds of our revenue was outside the U.S. We grew organically 17% in our businesses which served global, industrial and infrastructure markets. These businesses and products account for about half of our revenue as I just mentioned, and include Undersea Telecom which continues to be very strong, up 81%, Wireless Systems which was up 43% and continues to steadily build a base of business. Our Network segment, was up 6%, and as we'll talk in a minute had really mixed performance, and the industrial markets served…

Thanks Tom. And good morning everyone. Let me cover first the segment performance and then get into company wide items. Starting with the Electronic Component segment, our sales grew 15% in the quarter or 6% on an organic basis. Our sales for the automotive market grew 18% overall and 7% organically. As Tom mentioned, we continue to benefit from emerging market vehicle growth as well as content increases. On an organic basis by region; in Europe, where we generate more than half of our automotive revenue, our sales grew 10%. We did expect to see this sequential improvement coming out of Q2, and as... because we benefited from production increases at certain manufactures. We do expect this growth rate to slow down in quarter four. In Asia, our sales grew 17%, led by continued strength in China where growth was 25% in the quarter. And in North America, which continues to be very challenging, our sales were down 18% in the quarter as U.S. manufacturers continue to reduce production levels. Overall, our sales performance in the automotive market was very good in the quarter despite a weakening environment in the U.S. Year-to-date we've grown almost 6% organically in face of a 14% decline in U.S. revenues. Next in our computer market, our sales declined 2% as we continue to rationalize our portfolio by exiting some low margin product lines and being more selective with new projects. In the communications market, our sales also grew double-digit which is 10% organically. And in the infrastructure piece of this market, sales grew 13% with solid growth in all regions, and we expect this growth to slow in quarter four. In the mobile phone side of the com market, our sales of interconnect products grew 11%, and this brings our year-to-date sales growth to…

Thanks, Terrence. I'm not going to talk about the trends we are in the business and our outlook for Q4 and the full year 2008. Just imagine, as we did last year, we'll provide the guidance for the upcoming fiscal year, out fiscal year 2009, which starts October 1st, as part of our next earnings call. So I will not be touching on '09 here. For the fourth quarter, we expect sales growth of 6% to 8% with organic growth of 1% to 2%. We expect adjusted earnings per share of $0.65 to $0.67, which is another nice double-digit increase of 12% to 16% over the prior year. And we also expect another strong cash flow quarter, and this will mean that all four quarters of this year, our first year since separation will generate double-digit earnings per share growth in spite of a very weak U.S. economy in the businesses we serve. Now, let me talk a little bit about what we're seeing in our markets. Over the past two months, we have seen our order rate soften a bit particularly in the consumer related portion of our electronic segment, which includes automotive. So, our consumer business has been soft for a while, that softness has increased a bit in the last couple of months. As a result of this, we expect to flat revenue decline in our computer related... in consumer related revenues of about 1% to 2%. On the other hand, we expect solid high single-digit growth in our industrial and infrastructure businesses. And included in this high single-digit growth is a slowdown as Terrence mentioned in our telecom networks business due to delayed private deployments. We're well positioned with all the customers who are rolling out fiber in Europe and the U.S., but we expected it…

[Operator Instructions]. First question comes from the line of Matt Sheerin of Thomas Weisel Partners. Please go ahead.

Yes. Thanks. Good morning. Just a quick question on the SG&A and gross margin trends, it looks like gross margin was down sequentially and SG&A in a dollar basis was down substantially. Was that just due to mix or did anything else happen there?

Matt, it's Terrence. Two things yes. Sequentially, it's due to business mix and also a little bit to how currency translation comes through well that's basically what's happened sequentially.

Okay. And then just following up on gross margin; I know at your Analyst Day, you talked about passing along some pricing... raw materials price increases to customers, how successful has that been and what kind of contribution was that to either revenue or margin?

Hi, Matt this is Tom. We're getting better at that. I think our processes as I have mentioned before, we did a lot in the last couple of years to tighten up our process and make sure we are more nimble in the marketplace. And as you know, the nature of most of our businesses are lot of relatively small projects that we are pricing all the time. Having said that, we estimate that we're getting back about 50% of the gold increase that we've seen. There is a lag effect cold of course with the top $50 tomorrow; we would not get our prices adjusted right away. But we're doing pretty well while covering that so that if the volumes that we have and at productivity levels we have as we get in Q3, we can improve the margin.

Okay. Great. And just lastly, could you update us on the plan consolidation efforts, what happened in the quarter and your plans for the next quarter?

No. We had a few of that we initiated in the quarter. Nothing really big. The quarter for us was more continuing to execute some of the big wins we started in the fourth quarter and the first half of this year. We are now going to coming into a phase; we can't get into specifics where we're going to see another ramp up in the level of restructuring.

Okay. Thank you.

You are welcome.

Okay thank you. And the next question comes from the line of Amit Daryanani of RBC Capital Markets. Please go ahead.

Thanks a lot. Good morning, guys.

Good morning, Amit.

I guess just a question, I'm sure its in everyone line of suspect, as you are looking at the next quarter of guidance, you are seeing some material organic growth degradation. I know you touched on the auto business being a little bit stronger than you expected this quarter, your appliance segment was actually up 7% organically and I think the consumer business did better than what it did in the quarter before. I guess I'm just wondering, do you think you saw some pull ins [ph] in the June quarter did you restocking or probably purchases ahead of some price increases which was what September maybe a little bit softer?

Amit, no. I don't think... I actually... we expect that a little bit when we announced pricing to the distribution channel it was going to be effective early in the fourth quarter. But we didn't really see that much pull inns. As far as auto; auto was very strong in Q3. I mean it was double-digit in Europe, right around 10, it was over 15... 17% in Asia. We expect that Asia to be more 10% to 12% in Q4 and Europe to come down to 2% to 3%. If you look at Q3 and Q4 together, it's running at above the 6% level which it's averaging for the year. Last year, Europe Q4 was 5% sales. I think from where we started a quarter ago to where we sit now. The single biggest changes, auto was stronger in Q3, a little a weaker in Q4. Overall, probably about the same and the telecom businesses is weaker in Q4. And of course I mentioned, we took the state of New York out. So no pronounced trends, but hey we are watching it closely as you can imagine.

And Amit, our appliance business was only up about 1 or 2 points.

All right. And then I guess again it relates to Tom said you said you don't want to talk about fiscal line trends at this point, I guess maybe just talk about why the immediate reaction [ph] of extrapolating the soft organic trends in the September quarter, throughout fiscal '09, its probably not the right way to look at things?

Yes. I think its not. Its only one data point and it's also for automotive business. Its one thing seasonally, naturally slowdown a bit because of the model change over. It's to hard to call where the U.S. market, immediately [ph] is going to be, and its worse than we thought it would... we knew its going to be tough a year ago, but we didn't think it's going to be this tough. On the other hand Eastern Europe and China exports from the Western Europe to Eastern Europe, China has been stronger I think anybody expect this. I wouldn't, I mean its too early to tell, this is an important quarter for us to... for our fourth quarter to understand. how that sets us up thrown in '09.

All right and just finally, I am going to hop off after this, the wireless systems sales have been strong business from the customer rebounding. Do we expect that sales contribution to continue this with Q4? Was it a one quarter blip and how should we think about margins next quarter in that segment?

I think when you look at next quarter, I think wireless sequentially will look very similar sequentially. Q4 typically is very strong for all wireless segment. Historically and as Tom said Q4 won't have any impact for the state of New York in it which was in our prior guidance.

In margins I am sorry Terrence should stay around the levels then--

I think they are similar in quarter four it's similar to quarter three.

Fair enough. Thanks a lot guys.

Amit just to add a point to that, our business there is stronger than it was a year ago, our base of business is stronger and of course, to think of most important thing for us is to get phase I of New York approved.

Got it.

Okay, thank you. And the next question comes from the line of Ajay Kejriwal of Goldman Sachs. Please go ahead.

Good morning, gentleman.

Good morning.

Hi, Ajay.

Just wanted to maybe touch a little bit on the New York state project I know it's close part of the prior guidance but is not now the full year. So maybe if you could talk about what's the dealing that project and when do you expect revenues and also is just because you pulled that out of the guidance how much did that hurt your guidance on the top-line and on EPS?

Sure, New York is up there just a few days ago setting up our projects progress excuse me, it is two big pieces I think in terms of going through the testing on this kind of a project. The first one is that we... a key part of this is delivering significantly improved coverage for the folks to use it. The state leagues and all the other state agencies and we passed that test about six to eight weeks ago. So the coverage, really is the best coverage of any system of it's type in the world. Now we are into the new degree testing of the radio. So people driving around and using these, devices in every imaginable way to make sure they do what they say they should do. So the typical process on this is the test you find a few bugs here and there, you fix the bugs you retest, and that's where we are and we were in the last probably 30 days of it and it's a stressful time for everybody involved. But having... since its coming down so close to the wire at the end of the quarter, we just felt its prudent to take it out of the quarter. We could get acceptance in early September but have a punch lift and maybe that wouldn't enable us to recognize revenues. So I just thought the prudent thing to do is take it out but we would expect to recognize the first phase revenue early next year.

And Ajay from your question on numbers, it's about $40 million of revenue and a little bit more than a penny.

Okay. So if that was in your new guidance, it could have been... the top end would have been similar to your old guidance?

Correct.

Yes, okay. Moving to Europe auto I know you talked about slowdown sequentially 2% to 3% but maybe some more color on what's, is it production slowdown you're seeing, is it general economy and I know you don't want to talk about '09, but any general thoughts on what you expect going forward in Europe?

Well I think its coming off really robust quarters, so I think there's a little bit of that. So we didn't expect the growth rate to be like it was in Q3, even when we said here a quarter ago we expected Q3 to be much stronger than Q2, and Q4 to slowdown again. I think the thing we're watching closely is the demand for vehicles in Western Europe. About a half of woods producing Germany which is the big exporter there, those other are the places and exports to U.S. decline several quarters ago and this really got, redirected to Eastern Europe, Russia, China etcetera. So, that market continues to be a pretty robust. I think the question that we are watching very carefully and its, really too early to tell. As is this there a slippage in demand in Western Europe. So that's where we are factoring into our Q4 we got about a 2% to 3% growth rate as I mentioned versus 10% in Q3 versus last year's 5% in Europe. Year-over-year both had about 6% in Europe, So, '07 grew 6% in Europe, '08 is going to grow about 6% in Europe.

Got it. And maybe finally if you could update us on progress on restructuring in Europe, any new initiatives in the quarter?

No new initiatives in the quarter in Europe. Working a on a lot of things in the planning stage but of course until we formally announce them through the appropriate channels, we can't say anything but you know we have a lot a work to do here yet.

Got it, thanks.

Thank you.

Okay, thank you. And the next question comes from the line of Jim Suva of Citigroup. Please go ahead.

Hi, thanks very much. Tom can you just clarify a little bit, you talked about the European auto market. Some of the recent trends from there for both Western and Europe are actually showing a little bit of a deceleration. Can you again talk about what you are seeing there in Europe and your expectations for European auto?

We are seeing that too Jim. It's not yet pronounced as our 10% growth in Q3 and 2% to 3% growth in Q4 because Q3 was unusually high, but that's why we have taken that's one of the reasons why we adjusted the Q4 outlook down because we do feel it. It's a little slower. Its hard to tell its just a trend... beginning of a trend is it's just an adjustment but its definitely a little bit slower. We don't sense any massive things going on in Europe like you see any where near you will see going on in the U.S. it's more of fine tuning down of the production so are the OEM.

Fine, can you just clarify why you tuned it down from or say from the reported quarter to now what you expect the quarter to be?

By a about a percent.

Okay. And then second follow-up question, can you and maybe this is a question for your whole team but, when you talk about that other income line that you guys were expected at least $10 million to $15 million. I had thought that there was an offset of lower tax if that line comes in lower that those two should typically wash themselves out and it came in $1 million but your tax, wasn't benefited from that and it seems like you kind of left $0.02 of EPS on the table this quarter but now looking out to next quarter, it seems like A; you are not recouping all of that, you are just going back to the steady stage. I thought that the other income line and the tax line had some type of washing or counter levels there?

Yes Jim this is Terrence. As I stated on the prepared comments you are correct how you think about it, that came down also we had a favorable impact in the tax rate, but due to tax planning initiatives that we were working on. We actually also took a hit in the quarter by a similar amount in the effective tax rate, that sort of mass not affecting that you would expect to see, but that was a one-time effect does that other income being down this quarter, just due to some adjustments related to the sharing agreement.

In those adjustments do they implement on going or looks like its coming back?

One-time. So that's why you see that rebounding back in the fourth quarter. They were one-time adjustments and then the planning, we did gets us down to a lower rate here in quarter four, as we mentioned being down to 35% versus the 36%, we mentioned previously.

Okay and $10 million to $15 million forward-looking is a good rate let's say even beyond the next quarter like a consistent run-rate or is it?

I think that's right now is the way you should think about it.

Great, thank you very much gentleman.

You are welcome.

Thank you. And the next question comes from the line of Shawn Harrison of Longbow Research. Please go ahead.

Good morning, just a few clarification, the $50 million increase in global is that sequentially or year-over-year?

Year-over-year.

Year-over-year.

Year-over-year. And then secondly if you could just highlight what your hedging strategies are right now for commodities?

Shawn it hasn't changed from what we have mentioned before. On copper we had been fixing out commitments out, I would say right now we are only fixed out into the next quarter which... blended rate right now is probably about a 350 to 360. We currently do not hedge any gold.

Okay, and then just looking at the Undersea Telecom business maybe I missed this, but did you state what the backlog was exiting the quarter?

That's 1.3 billion Shawn.

Okay and that's up sequentially?

That is up from 1.1, we landed three new projects some of those do go out into '10. I would say from where we see Undersea for next year it's still in that $700 million to $800 million range with where we sit today, with certainly activity remains good there.

Okay. Just thirdly, wireless systems given the better mix here that's expected for the fourth quarter from some of the handsets. Does that continue into 2009 or should we see kind of slip back in terms of the profitability?

That's going to slide back a little bit Shawn. There is a lot of rebounding this year, where operators are trading out because of the frequency changes out there. So it's a little hard to accurately predict the rate at which that happens and so we were, we'll use a better rate this year than we expected but we would expect that to decline a little bit next year.

Okay. And it seems like the incremental margins on the rebranding here 50% plus?

Yes, there, its attractive.

Okay. And then finally any share repurchase activity you quoted a date I know, I think you stated that?

Yes, we've done about a $100 million since the end of the quarter. So, we've have a... done a $1 billion under the whole program to-date and with the authorization, we're increasing up to 2 billion we still have a billion to go.

Okay, thank you very much.

Thanks, Shawn, welcome.

Okay, thank you. And the next question comes from the line of Margaret Cappora [ph] of Credit Suisse. Please go ahead.

Hi, I just had a... housekeeping question on your outlook, your adjusted EPS is at $2.63 to $2.65 for the year. That's $2 for the first three quarter of the year, is that just rounding or something because at--

It's share count.

Okay.

Share count average for the quarter versus for the full year.

Got you.

And the math works.

Okay, thanks.

Thank you.

Okay, thank you. [Operator Instructions]. And there are no further questions, please continue.

Okay, well thank you for joining us. The Investor Relations team will be around all day to answer any follow-up questions. And we look forward to talking to you at future events. Take care.

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