Ladies and gentlemen we'd like thank you for standing by and welcome to the Tyco Electronics reports fiscal first quarter results teleconference call. At this time all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, today’s call will be recorded. I would now like to turn the conference over to your Vice President of Investor Relations Mr. John Roselli. Please go ahead sir.

Thanks Steve. Good morning and thank you for joining our conference call to discuss Tyco Electronics first quarter results for fiscal year 2010 and our outlook for the second quarter. 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 and the accompanying slide presentation that addressed the use of these items. The press release and related tables along with the slide presentation 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 everyone. And if we can start with slide 3. I'll briefly talk about the first quarter and what we're seeing in our markets right now. And then I'll turn it over to Terrence and he'll go through our Q1 results in more detail. Our first quarter was a very good start to our fiscal year and it was actually our third quarter in a row of solid sales and profit improvement. Our sales and earnings significantly exceed our guidance in yet another quarter of strong free cash flow. On the sales front, we grew 7% sequentially to $2.9 billion and our largest segment Electronic Components we grew 17%, it was 14% organic growth. On a very positive note, within the Electronics Component segment consumer and industrial markets grew at double digit rate sequentially resulting from a combination of improved end demand in most of these markets as well as continued inventory replenishment in the supply chain. Our Networks and Specialty Products businesses did remain somewhat sluggish in the quarter and we expected this that they are showing some signs of stabilizing demand and our Undersea business declined 25% sequentially as we expected. The sales growth in the quarter coupled with our aggressive cost reduction efforts and footprint actions resulted in our gross margin improving to 29% and this improved our adjusted operating margin to 11.5%. This compares to 8.2% in the prior quarter and just as a point of reference in our fiscal year '08 when our sales rate was about $14 billion, our average gross margin then was 29%. So, as you know, a big focus area for us over the last couple of years has been to improve the operating leverage in the company and I’m really pleased with the operating leverage that…

Thanks, Tom and good morning everyone. Let me start by reviewing our sales performance by the segments and by market, then I'll review earnings and cash flow. If you turn to slide 4, this slide shows our overall revenue performance by segment both on a year-over-year and sequential basis. Total company sales were $2.9 billion and this was up 7% in the quarter versus the prior year sales of $2.7 billion. Sequentially, sales were also up 7% as a result of the strong growth in the electronic components segment of 17%, which was partially offset by declines in the other three segments. In our businesses serving the consumer markets, which is about half of our business and is mostly concentrated in our component segment. Sales increased 18% sequentially driven by improved demand and inventory restocking. The industrial and infrastructure markets continued the trend from last quarter and were essentially flat on a sequential basis. We did start to see signs of stabilization and signs of improvement in our order rates and the industrial and infrastructure markets excluding our undersea telecom segment. Now let me get into more detail and cover segment performance by the market. Unless otherwise indicated all changes that are mentioned are on an organic basis, so let's turn to slide 5. And before I start getting into the detail I want to remind everyone that beginning this quarter we reclassified sales to certain end markets and our components segment we recreated new industry groupings and we now allocate distributor sales to end markets where possible. We did file an 8-K on December 8 that provided quarterly information for fiscal years 2008 and 2009 and these new market groupings. So, now starting with the left side of slide 5, sales in our electronic components segment increased 12% versus…

Thanks Terrence. I’m going to talk about the second quarter outlook now. You can turn to slide 12. In Q2 we expect our sales to be in the range of $2.85 billion to $2.95 billion. Organically our sales are expected to be flat to slightly up versus Q1 again, we do feel good about end demand but the inventory replenishment, a piece that’s driving our revenue is going to slow down in the back half for this quarter. We expect adjusted operating income to be in the $335 million to $370 million range compared to $332 million in Q1. The continued improvement and sequential profitability is primarily due to improved leverage from productivity gains in the Electronic Component segment and this should result in a gross margin in the 30% range up from 29% in Q1. And our adjusted EPS from continuing operations are expected to be $0.49 to $0.54 which is a range of sequential increase of 4% to 15%. So, in summary, really pleased with the start to the year, off to a good start, second quarter shaping up. Then most of our end markets are improving, although as we mentioned several times, we do expect the inventory replenishment portion of our demand to slow down this quarter towards the end of this quarter. Our delivery is improving but it still has more to go there for sure and we are improving on that everyday. I think we feel best about what we've done with the operating leverage in the company which was just the top priority when we separated the company almost three years ago. Cash flow continues to be strong and in particular, the working capital management of the company has improved significantly over the last several years. And we're last but certainly not least, we're really excited about having the Sensitive Object team as part of the Tyco Electronics team. We are very, very bullish on our touch business. This team we're bringing in has tremendous talent and capabilities and we think to compromise those two is going to enable us to continue to grow that business significantly. So, with that let's open it up for questions. Operator?

Ladies and gentlemen, we'll now begin the question-and-answer-session session of our conference. (Operator Instructions). Our first question will come from the line of Amit Daryanani of RBC Capital Markets. Please go ahead.

You guys have done a fairly exceptional job I think of getting back to this 12% margin target on sub $3 billion revenues based on the guide. I'm just curious as we move forward, I think the big question, it was on a struggle where there is, do you guys still have room to sustain these out priced margin expansions or going forward will margin expansion be more driven by sales though the (inaudible) leverage will return back to the sale mid 20% contribution margin rates. So could you maybe just talk about how the model works beyond the 12-12 target, and do you have any restructuring savings left to be realized on the cogs of (inaudible) for fiscal '10.

Thanks Amit for the comments, and yeah I think the way you summarized it is actually the way we see it. We have had obviously significant lift in the last couple of quarters, combination of the inventory of reductions being behind us, the restructuring kicking in and the resizing. Going forward its going to be a more normal margin flow through of 25% to 30%. The productivity improvement is certainly a very high priority in the company. There is a little bit of restructuring left to benefit the next year, year and a half and Terrence can comment on that in a minute, but I would think of it is, you know we're going to get back to normal margin flow through and as we said a month and a half ago, we were in New York investor day and we now see a 15% operating margin in target in the $14 to $15 billion sales range. So that’s at a much lower level that we had laid out two or three years ago because of all the progress we've made on portfolio restructuring and just general cost saving.

Yes from the restructuring prospective on that, when you look at it like we said, coming out of last year we had about $15 million as savings that still need to click in and that clicked in the first quarter. There are some other effects going out through the year but it's pretty negligible, it's not big. So, it does come per volume. So I think you're thinking about it right home.

My second question was, yeah I think last quarter even at the analyst day you guys, we talked about auto production being up about 10% in fiscal '10 but there was some caution what China would do with the incentive programs on the auto side. Yeah, now that China actually extended the incentive programs, could you just talk about how are we thinking about auto production in 2010 and what does it mean for Tyco's auto business specifically?

I think from when we talked to you last time, the estimates by the industry are a little bit higher in the $62 million - $64 million range, that’s where we moved from. So obviously we should benefit from that. Again we are watching it closely but clearly it was stronger in December than we thought. And I think the industry as a whole was stronger in January than the industry was projecting that would be. So right now the experts are calling $64 million for the year.

Our next question comes from the line Matt Sheerin of Thomas Weisel Partners. Please go ahead.

Just ask another question regarding auto. Looks like you are seeing a little bit of more inventory refresh in the March quarter. Do you get any sense of what inventories look like at your customers there? Do you think they are going to end up being at normal levels when this refresh is done below normal or even better than that?

Well, we pick up some data but I would say our view of it is that as this normalizes and production and our sales get more inline within production as the inventory get outs out in the whole supply chain. You're going to see at or slightly lower than where they ran in the past, just talking to most of our customers a year and year and half ago. They said, we probably had too much inventory. So, I think its going to end up a little lower but that’s hard to call right now because when things get tight, everybody pushes hard to make sure they get more than enough inventory. I think everybody is going to get a little smarter I guess the way it ends.

And I guess my point Tom is that we've seen this from a lot of other suppliers where business is very strong or even seeing because of overheated order environment and for Tyco, are you planning, or you bracing for any sort of volatility that might come either whether the June quarter or September quarter, will you see orders decline because there is an inventory adjustment or some supply chain adjustment the other way and how are you planning your business around that?

We are planning for orders to decline in automotive starting the end of this quarter and to be down in Q3 and Q4. Our estimate is that in the last couple of quarters, we've benefited from about $100 million, $75 to $100 million of replenishment of the pipeline over and above kind of which you'd normally expect. So it's definitely our revenues hotter than end demand right now and we're factoring that into our planning for second half.

And Matt just to add to what Tom said, we talked about the 64 million vehicles. We do expect that quarter one production levels were about $16.5 million vehicles in quarter one. That also we're planning to come down to about 15.5 million vehicles on average through the rest of the year quarter two throughout quarter four. So that's how we are looking at the year.

Okay that’s helpful and just on the Toyota news with the recall and it looks like they are halting production on certain models. Does that impact your business at all short-term?

Short term would have a minimal impact that's all included in our guidance per the quarter. So it's not a big impact when you look at it.

Our next question will come from the line of Steven Fox of CLSA please go ahead.

Hi good morning. Tom you mentioned that you're having some confidence in the second half of the calendar year I think in your prepared remarks. Away from auto, are you seeing certain signs that are pointing to sustainable demand or improving demand in certain markets that you could highlight further beyond and say this quarter?

Yeah I think for the last couple of quarters sequentially we've seen first the recovery and then the pickup and the recall our industrial and infrastructure businesses within our Component segment. So that selling to the capital equipment makers, telecom infrastructure. We’ve seen a pick up in appliances particularly in emerging markets; there has been a fair amount of stimulus in China for example on appliances. Our networks business hasn’t turned yet. As Terrence mentioned, that’s still down sequentially little bit of that is seasonality but we are talking to customers, we are starting to see signs that we expect that to start going in the positive direction in the second half. The same with aerospace, our aerospace defense and marine business, you know again that was down about 5% sequentially. We think later second half that will start to pick up and hopefully the (inaudible) will begin to build and so the product will have to get laid in for that pipeline. So, the way I think of that sort of the big picture, and with that not getting specific on guidance obviously because visibility is pretty limited but auto as I said on the prior question is going down we would expect, based on everything we see, not dramatically its still doing a lot better than we would have thought three or six months ago and the industrial infrastructure network specially product side of the business is going to come out of the troughs so to speak.

And then just Terrance on the cash flow side, would we expect in the next few quarters to see similar say free cash flow to net income ratios. Is there anything we should be thinking about plus or minus beyond what you guys just did in terms of free cash flow trends?

No I think just where we are and with the guidance that we gave going from quarter one to quarter two, I think you are going to continue to see pretty solid cash flow. We may have some other restructuring cash, it could be lumpy but I think you're not going to big spikes upper, big spikes down.

Okay, great. Thank you.

Thank you.

Our next question will come from the line of William Stein of Credit Suisse. Please go ahead.

Thanks. Couple of quick questions, first I though as if you already gone through this; on the restructuring, I think in the past we have discussed a small amount of incremental savings from the footprint reduction flowing through in March. Can you tell me whether is that contemplated in guidance and is there anything further that we should expect within a sequential basis into June there will be on from structure.

Well, it's Terrence. It's about an incremental $10 million from quarter one into quarter two and that is included in our guidance.

And is that quarter-over-quarter savings?

That’s from quarter one to quarter two, it’s sequential.

Okay and anything beyond that at this point?

Negligible.

Negligible. Okay, then I was hoping you could for a second discuss the touch screen acquisition. Remind us where you are positioned now and what is the acquisition bringing in the future?

We have been in the touch business for several years and its genesis was really out of the Raychem company that was acquired 10 years ago on the material science that goes into enabling touch so very natural place for company to have gone and we like the business for the obvious reasons. Our focus, our success, we have pretty nice position in many market, the leadership position in the commercial and industrial so if you go into photo kiosks, retail, hospitals more often than not, its our touch screen, not always branded our touch screens says we are able to sometimes brand them for our customers. So that’s been a good solid part of our business. The other thing about touch is, there is a number of different technologies depending on the application so the same technology that you would use on an iPhone, which is not a technology we have, we wouldn't use in an industrial saying because it's not robust enough. What this Sensitive Objects does is it brings Acoustic Pulse Recognition capability. It's a different type of touch enabling technology, it's relatively new. We've been developing in our business as well again for commercial application and so it's been developing it for consumer and mobile applications and between them we had a tremendous amount of increased our just sheer technical horsepower around the capability which is very promising about it is that its lower power, you don't really need a template. So if you think of a touch screen today, there is a screen over the actual monitor that you touch and with that also enables is that you can use any kind of stylus for this kind of touch, so you could use your finger, you could use the stylus, the old PDA kind of thing As we said in the opening comments, we're still a year to two years away from many significant product, so this is R&D investment for us, but we have a very nice position in the touch business. We wanted to strengthen it, and this is something we've been looking at for a while. We've worked with this group for a while, so we're very excited to have them as a part of the team now.

Great, and then just a follow-up on that. Can you talk to us a little bit about the acquisition pipeline as it stands today?

Yes. Sure, I mean the acquisition pipeline is, it's getting more robust. We've been working on it for 18 months. I think we've been, this is our first one. We've been thoughtful about it because we had to get through the divestiture pipeline first, and get in better fighting trims so to speak to be ready to do M&A, but we've been working a number of opportunities for a while. As you also know it takes a while and you have to be very active to get down to a couple so we have come a long way in the last year in that pipeline.

Our next question comes from the line Amitabh Passi of UBS. Please go ahead.

Operating margins and network solutions quite a bit decreased sequentially quarter-over-quarter even though sales were only down marginally just wanting what might have contributed to that?

When you look at it, one thing I would be in pressure that if you go back to my revenue comments is that in our service provider market as the Telcos have really cut back capital and have cut back specifically in wire line that has really hurt our margin and the Network Solutions segment overall just from a mix prospective. So when you look at it that business was down 25% year-over-year as well as almost down 10% sequentially. So that is putting a burden on the gross margin and operating margin in that segment. We do think that we have hit sort of a bottom point in that business. We did see some uptick in orders late in the quarter. So really it all comes down to really a market mix is what we are dealing with right now.

Okay and then just related specifically within the communication service provider's sub-segment of Network Solutions. We have increasingly operators talking about decreasing investment in wireline and sort of focusing more in wireless. I am just curious strategically any intention of expanding your solution set within that sub-segment to sort of address may be the wireless service provider community.

Well I wouldn’t get that specific but I would say generally if you think about where our primary focus on M&A and partnerships is exceptionally and specialty products and networks. So we really like the networks business between our Undersea Telecom although that’s not in the network segment but if you think of all of our telecom business, our component side of it, our enterprise business and the service provider business. We are at top one, two or three player depending on the region and all those but we like to stay clearly with broadband now continuing to proliferate and outpace everybody’s expectations in terms of all the data that’s lying over the networks. We think in the long haul it’s an attractive space and it’s a space we'd like to get stronger and so it's an important one to us. I think in the short-term, this proportionate switch I would say were reemphasis or increased emphasis because of the smart phone impact on capacity into wireless which is great stuff for anybody that’s in the networks business is slowing down our wireline business. There is going to be significant opportunity though as the structure continues to change to more fiber connecting the base station. So, we are still very attractive about the fiber piece of it. But overall we like the business and some of the things in our pipeline and definitely focus on that business.

Great and just one final question, Tom. I think you talked about your China automotive business, I guess approaching a $300 million annual run rate. I am just wondering should we expect any meaningful regional shifts this year within your Automotive Segment looks like Asia is about 25%, 26% and then related to that, I think in the past you have talked about a $58 to $60 roughly per vehicle content. I mean does that sort of materially change as we progress for the rest of the year?

In terms of the region, the $300 million were last year’s revenue in China. I think we are going to be on closer to $400 million this year and so obviously that markets robust we have been there a long time and we provide a wider range of capability than we typically do in a mature market especially to the local OEM because they are earlier on the learning curve. So it's very attractive for us. I think we will continue to see Asia driven by China and India become a bigger part of our overall automotive business. I don’t think you are going to see massive changes year-over-year but a gradual study that becomes a bigger part of our business as far as content goes we really haven’t seen anything significant yet when we think about content we think about increasing our content from model. So as I think about it really the content in every model whether it’s a low end two cylinder car or an 8 cylinder, 12 cylinder car in Europe the contents going up for all the reasons you know about the averaging impact of; hey there are more small cars this year than last, there is a little bit of that but its we have always estimated that as a $1, $2 and its definitely in that range of no significant shifts.

Our next question comes from the line of Jim Suva of Citi please go ahead.

Thank you and congratulations, gentlemen. I have two questions the first question is on the acquisition that you did it appears that this is kind of a pre revenue company or early stage company is that the type of M&A strategy you are pursuing or are you looking at more companies that are in production for your M&A pipeline and then my second question is earlier in your prepared comments you have made the comment that you were progressing on your restructuring according to plan and on track. When I look at your guidance for next quarter it's below a 12 billion run rate and your operating margins are above 12%. So it appears that you are not actually on track, it appears you're [faster] star rating because that would then also conclude that you are not getting any additional future benefits from restructuring so those are my two questions.

I would say on the M&A strategy it really depends on the opportunity or the gap we are trying to fill. So in we are going to do both, you typically expect the smaller ones like the one we did with a sense of object or if we do other smaller on the technology side it would really be to make sure we are building out our technology capability in a particular product line. You know there’s a lot of technology changing fast and us being a significant player in every market you can’t do it all yourself. So we really have built out and continue to build out a nice network of companies we look at universities we partner with to make sure we are on the leading edge at a minimum of understanding what's going on but preferably participating in some of them. So we’ve done small and this is a relatively big one of this type which is why we are talking about it. I would say generally speaking, if you talk about what we are going to spend on these kind of things the majority of what we are going to spend and invest will be on the company with that revenue. I would expect that. So if you look back a year or two from now and you say; hey we spent x I would expect a vast majority of that x is going to be on companies that are revenue generating companies from the get go. But this one is one, we’ve been dealing with this company for a while. We really like their team and their capability. And it's just a great hit with us so this is a free revenue. But I wouldn’t put it in the startup category, they have been around for several years and have excellent partnerships and excellent technology. And then on the margin rate I’ll make a comment and then turn it over to Terrence to elaborate on it. Lets say, if we hit this 12% as we expect to in Q2 at less than $12 billion revenue, I think the important thing is we are on track right now, we are tracking to right where we wanted to be in any particular quarter could it be 12.3 versus 11.7 at the $3 billion revenue range, it could be depending on the mix of distribution, the mix of end market what is going on with [CapEx] but we are really pleased with the fact that we have got the operating leverage to this point which gives us a high degree of confidence that for the next wave as volume is back to more normal levels we are going to have the next set function improvement. Terrence you want to talk of restructuring?

Yes, Tom mentioned of Raychem, cost actions and what we went through last year we are getting cost based in check was one element, certainly it was improving our productivity and the operating leverage on just cooperation and what we saw during the quarter was with the volume improvement we had mainly in the component segment, we were able to convert very nicely on it, not just there was a cross actions but also improved operating leverage. So, it’s the cost action when we look at, what laid out last year, that’s completely on track what I covered back on investor day from a footprint has on track and that hasn’t change but really what we got is when the volume came through, we executed very well in converting that volume and have a very nice flow through. And so the benefits that are still to come are like I said small sequentially in quarter one to quarter two about $10 million but we are also getting efficiencies in our plant. As volume has ramped and that’s really what you are seeing in the guidance and around that $2.9 billion to $3 billion level like Tom said we would expect to be around 12%.

Great, thank you and congratulations gentlemen.

Our next question comes from the line of Shawn Harrison of Longbow Research. Please go ahead.

Getting back to the automotive question, I just wanted to be clear that as we get into the bank half of your fiscal year automotive maybe a little bit of a headwind to growth, is that what you were trying to suggest with the statements?

You could look at it that way. It's because anytime you are in inventory replenishment cycles you're going to get the suppliers like us are going to sell, we are going to grow at a higher rate than actual end production and I mean if you go back to the last year production was down in '09, 22% we were down 31% and in some quarters, it was much more pronounced than that. This year in the first quarter production was up double digits, and we were up 10% more than that, so you see the catch up happening that, I think that's actually lasted a little longer than we expected. We would have expected it to end a couple of months earlier, but it's still happening which I sense is a good sign of where our OEM customers think and demand in, but we have the short answer Shawn is yes, all things being equal the way we see them now. Automotive revenue for us would be a little lower in the second half and the first half.

Okay, and then as we get into maybe what is within the electronic components business, a more normalized environment, what is the typical seasonality that we should now expect given some of the changes in mix on a typical say third and fourth quarter?

Typically, we haven’t been there for few years, what we've gone through Shawn but if you look at it typically, components typically has a normal [point] if you go back to '07 type period before that, typically where we get impacted is quarter one and quarter four are weaker quarters impacted by shutdown in the first quarter by OEMs around automotive around the holidays and also in the fourth quarter due primarily to our European automotive sides there that you get the European holiday. So typically both of those quarters are about 5% lower and a normal environment than our second and third quarters. So you really have that the middle quarters are your stronger quarters in component and then the first and forth were a little bit later.

Okay and then on Network Solutions maybe if you could just speak of within the three individual segments, what are you saying on a calendar year basis, in terms of capital budgets. Will there be growth if there is, it sounds like its going to be back half waited but maybe if you could just elaborate on what customers you are telling about their capital budgets for 2010?

What they are saying is they expected it to start showing up in the summer I would say, late spring or early summer which would be our second half, we are seeing some signs of that but this is also typically the weakest time for those businesses particularly service providers and energy because all that works are applied. And our strongest areas are the U.S. and Europe and increasing strength in Asia but most of the world were our businesses is pretty cold right now. So it’s a typical slow down. I think it’s a little hard to call right let's say you go back to 6 or 9 months ago and sort of tell us it was going to slow down that turned to be the way it was. Now they are telling us its going to start picking up so we are hopeful of that and we've seen just little signs of it but got to watch it closely.

And by picking up I means is that low to maybe mid-single digit year-over-year growth or something like that not double digits. Its just may be a way to kind of gauge our expectations.

Well year-over-year what you are going to have is when you compare year-over-year certainly those businesses came down later in '09 versus, so their first quarters were typically strong. What I think to what Tom said, Shawn you will get a seasonal pickup in the summer months naturally coming into our third and fourth quarter in these businesses what I would say is do we get a sort of a multiplier effect that spending kicks back in from a compare perspective. So I think you will see year-on-year growth in those businesses in the summer months. That is just due to natural seasonality versus how they came down last year but the real question that I think when we look at the orders is, is there a sort of a spending catch up that happens in those late quarters.

Our next question will come from the line of Brian White of Ticonderoga. Please go ahead.

I am wondering if you could talk a little bit about the pricing environment and how you are handling rising commodity costs.

Pricing hasn’t really changed too much. If we look at our overall pricing erosion it's still running south of 2%. I think that we are a little bit better at it than we have been in the past is where we have the opportunity to react to commodity costs, we're doing that. As you know this is a business of literally thousands of price quotes a week. But generally speaking, haven’t seen any major shift in pricing at all.

And then Brian just to add to that, just to frame the commodity environment that we are in right now, with the fixing program we've done and last year we turned off the hedges so we didn’t get a big windfall last year due to metals. Right now we’re probably experiencing may be a $5 million per quarter headwind in quarter one and quarter two due to metals and its really more on gold and copper and that probably increases up to a $10 million later half in the year if gold stays around the 1,100 (inaudible) a day and copper is around the 330.

Some of our risk management techniques are also protecting this.

And when we look at your seven different markets in the Electronic Components business, which one do you think will show the greatest strength in the March quarter sequentially and the greatest strength over the next year?

Do you mean just pure just growth numbers?

Growth numbers yes.

Yeah not necessarily [Multiple Speakers] year over year.

Just sequentially in the March quarter versus the December quarter and then if we also look out over the next 12 months.

Well I think the compares, I mean if you compare it to the low, auto has already got a couple of months of improvement under it. I would say industrial, because it started later but that's a lot smaller business than auto for us although we are a leading player there.

As well as data comp.

Data comp.

Yeah that really started to show momentum this quarter.

Yeah I mean think about it, with the trend that Tom talked about already [prime], one of the things that was nice about what we saw in our first quarter was the industrial markets, when we talk sequentially, all orders been up 15% in the first quarter sequentially. It was pretty much 15% in the consumer markets and the industrial markets that we serve and that covers EC, Specialty Products and Network. So we are starting to see some more momentum at this phase. I think it will be more along those industrial type infrastructure markets later in the year.

And how about just activity customers coming our with new products? Where is the most activity in the different markets that you're serving in electronic components?

I think the most activity is always in the consumer in the mobile space in terms of just because of the life cycle of the product. So they are shorter, but clearly there is a tremendous amount of development going on in the automotive space and hybrid vehicles where we have a really excellent product line in more and more entertainment in the cars and you know changing, looking at more efficient infrastructures in the cars, a lot of activity around weight reduction and size reduction of everything including our components and even though there might be a small part of the equation in a jet or a car still a lot of the demand for our customer. So the technology envelope continues to be pushed. I don’t think we saw much slowdown in that during the downturn which I think plays to a company like our strength because we kept up the investment. We didn’t back off at all.

Steve we have time for one more question.

Our last question will come from the line of Wamsi Mohan of Bank of America. Please go ahead.

Terrence can you quantify the components of increased OpEx quarter-over-quarter particularly the pension expense and performance comps and should we expect an increase sequentially from here adding into fiscal second quarter.

Yeah, Wamsi let me, if you look sequentially and you strip out currency, we were up about $35 million from quarter four to quarter one, engineering was up about $5 million, the pension expense was about $5 million and the remainder was incentive compensation. Going sequentially out through the quarters, we do see and the things we touched on investor day, our engineering continuingly to increase as we do some of the investments we covered on investor day but I think the way to think about it is right now when we look at the year we're probably going to be around 13% SG&A rate this year and R&D will be around 5% of sales if we stay around our top line at where we're right now.

And then on share repurchases, you bought back a little bit here in this quarter. How should we think about it through the course of the fiscal year?

We have 600 million outstanding on our authorization still, so we will continue to look at it. What are the strategic opportunities? We do see that increasing off the first quarter levels and will assess it as we see market conditions and as we see our cash generation. So, I think you can see it increasing as we go through the year.

Okay, we'll wrap up then. Thank you for taking the time today to join us, I think we had a questions that we could not get to, I apologize. We want be respectful of everyone’s time. Yeah, our team will be around all day to answer any follow-up questions. So thank you and have a good day.

Thanks everyone.