Good day, ladies and gentlemen.And welcome to the JDSU Fiscal 2008 First Quarter Earnings Call. My name isEric and I will be your coordinator for today. (Operator Instructions) I would now like to turn yourpresentation over to your host for today’s call with. Michelle Levine, Directorof Investor Relations. Please proceed.

Thank you, operator and welcometo JDSU's fiscal 2008 first quarter financial results conference call. Joiningme on the call today are Kevin Kennedy, Chief Executive Officer and DaveVellequette, Chief Financial Officer. I would like to remind you thatthis call is likely to include forward-looking statements about the futurefinancial performance of the company. Forward-looking statements are subject torisks and uncertainties that could cause actual results to differ materiallyfrom management's current expectations. We encourage you to look at thecompany's most recent filings with the SEC, particularly the risk factorssection of our report on Form 10-K filed August 29, 2007. The forward-looking statements,including guidance provided during this call, are valid only as of today'sdate, October 31, 2007 and JDSU undertakes no obligation to update thesestatements as we move through the quarter. Our comments today will includenon-GAAP measures. A detailed reconciliation of these non-GAAP results to ourGAAP results, as well as a discussion of their usefulness and limitations, isincluded in today's news release announcing our results, available on ourwebsite at www.jdsu.com. Finally and as a reminder, thiscall is being recorded and will be available for replay from the investorportion of our website at www.jdsu.com/investors. I would now like to turn the callover to Kevin.

Thank you, Michelle and goodafternoon. Highlights for JDSU's fiscal first quarter 2008 non-GAAP resultsinclude, but are not limited to, first quarter revenue of $357.2 million growthof approximately 2% from Q4 of fiscal 2007 and 12% from Q1 fiscal 2007. Grossmargins are 41.3%, an improvement from 37.4% last quarter and 34.7% one yearago. For the second consecutive quarter, the book-to-bill ratio for the OpticalCommunications business was greater than 1. JDSU's adjusted EBITDA, as apercent of revenue was positive 6.6% twice that of last quarter. Operatingmargins were 2.2% within our near term target of 2% to 5%. Three out of four ofour business segments with operating margin improvement compared with lastquarter. And finally, we were free cash flow positive for the third quarter ina row, and balance sheet metrics continued to improve as reflected in our lowerday sales outstanding inventory levels and debt balance. To summarize, we saw keyfinancial metrics improved sequentially as well as year-over-year, as wecontinue to focus and execute on our goal of improving our business model.Before discussing the more detail segment reports, I’d like to reiterate thatour strategy continues to be to execute as a company comprising the portfoliobusinesses for the focus on optical and broadband innovation. We embraced this new sets ofcomposite companies will be better able to navigate fluctuation in anyoneindividual business. We continue to see favorable end market indicators forbroadband services and network ROADMs and we believe broadband capacity willcontinue to expand at higher data rates are being delivered through the accessedge accompanied by video application. We also believe that as networkoperator’s response in changing loads and consumer dynamic, networks will beagile in order to rapidly respond to the resulting changes in traffic patterns.Online customer visit this quarter, number of observations within the market,which are relevant are as follows. In general, network equipmentmanufacturers in Optical…

Thank you, Kevin. Before I start,please note that all numbers are non-GAAP unless I state otherwise. Thisquarter revenue of $357.2 million was up 1.8% from the fourth quarter and up12.3% from the first quarter revenues of year ago. First quarter gross profitof $147.4 million or 41.3% of revenue is up from the pervious quarters 37.4%.We saw improved margins in three out of four of our business segments due toproduct mix and the impact of our gross margin initiative. Operating expenses for thequarter increased to $139.6 million and were 39.1% of revenue. The increase isprimarily in R&D spending resulting from the full quarter impact of the Innocorand Picolight acquisitions. Our operating income for thequarter was $7.8 million compared with an operating loss of $4.3 million in theprior quarter. Adjusted EBITDA in the fourth quarter was $23.7 million or 6.6%of revenue, which compares to an adjusted EBITDA of $11.7 million or 3.3% of revenuein the prior quarter. First quarter net income was $18 million or $0.08 pershare. This compares with fourth quarter net income of $15 million or $0.07 pershare. The detailed reconciliation ofour non-GAAP results to our GAAP results is available in today's press release.Our first quarter non-GAAP results exclude among other items amortization ofacquired technology and intangibles of $18.9 million and $11 million chargerelated to stock based compensation. Including these items, fully GAAP net losswas $6.9 million a loss of $0.03 per share. Moving to the segments, in theCommunications Test and Measurement or CommTest segment, first quarter revenueof $168 million was down 2% from the prior quarter’s revenue of $171.3 millionand up by 43.8% from Q1 fiscal '07. Operating profit increased for the quarterto $26.3 million or 15.7 of revenue versus $26.2 million or 15.3% revenue inthe prior quarter primarily due to improved gross margin. In the Optical Communicationssegment revenue…

(Operator Instructions). Yourfirst question comes from the line of Ehud Gelblum with J.P. Morgan. Pleaseproceed.

Hello, can you hear me?

Hi, Ehud.

Hey, Ehud.

Hey, how are you guys. A coupleof quick questions, first of all we understand the book-to-bill on the AOTbusiness, I’m sorry on the [TNM] business was significantly less than one andis that cost for the lower guidance?

As I said, it is typically lessthan one in that particular quarter that’s normal. It was actually strongrelative to year-over-year. The guidance that I’m trying to give you is thatratio of peak to the nadir as we use it in the past use to be 1.1 to 1.3.

Right.

I’m trying to narrow that to 1.1to 1.2 for the following reasons. One is we move to end of the fiscal year ofthe contesting to our JDSU fiscal year, we saw greater strength in the Junequarter and less strength in the fiscal Q1 ends up probably being stronger, itwent down less than people might have anticipated, but the costs were up ofhigher base. You would expect that ratio to be less effective. The thing, as we’ve expanded ourportfolio through acquisition. And that ratio or the physics of the budget costis primarily associated with the dollars that are available in the serviceproviders or carriers worldwide across field service equipment. But the samephysics wouldn’t be applicable to portfolio that would go. The cost ofportfolio has grown outside the field service area you wouldn’t apply that samefield ratio to the full revenue stream. So, a number of conspiringfactors, but the net of it is that the ratio is smaller and finally we do havesome lower visibility then probably six months ago and some of the wirelesscarriers and that’s not a unique story. We are not highly exposed, but thoseare ways that forced us that made us the, to provide the guidance that we have.

I will catch up with the wirelesscarries in a moment. But first of all, when we use that 1.1 to 1.2 calculationthat’s on the peak to the nadir should we have, which quarter now that you haverealigned the fiscal year end to be one actually with yours. Which quarter nowofficially the peak quarter?

Peak is never a question forDecember quarter.

It’s still the December quarter.So this is, still will be, your best quarter of the year?

For the CommTest being that'scorrect.

Right just not necessarily as I’mjust trying to correlate vis-à-vis kind of what you have been looking forobviously you don’t know necessarily what the model was, but in terms of theyour components of your guidance. Can you walk us through what had beenexpecting growth rate was for the other businesses as well?

Ehud we sort of comprehend allpossibilities in the guidance that we gave you 372 to 394.

Okay. So we assume relatively similar types of growth in each onethat we saw this quarter I guess more specifically in Optical Communicationscomponent side, it seems we are getting a great from the inventory problems wehad in the past. Is that the most part over, so we can expect to see thatsomewhat rebounding?

At the end of the day, thebooked-to-bill is greater than one. Booked-to-bill is greater than one inlasers. We know that we have a budget plus phenomena in a strong quarter inCommTest and we did 357 and we are giving you a range 372 to 394 you shouldpresume that there is general buoyancy to large rest of the business. So thereis a lot of issued a date there for you frankly it will.

Right, definitely I can. Andlastly you mentioned wireless in the customer (inaudible) business what is yourexposure to wireless, can you tell us percentage vise?

I don’t know roughly its top ofmy head. It is relatively small in two areas. One is wireless service foreignwhich is single digit millions of dollars total and then wireless back-offs. Sothat's probably a bigger number, but its not mere shadowing number.

Okay. And you still expect the budget plus in your traditionalfiscal year end now, despite the potential cost you may even hearing some ofthese carriers?

That's correct.

Okay, terrific. Thanks so much.

Thank you

Your next question comes fromline of Jeff Evenson with Sanford Bernstein. Please proceed.

Hi, I was wondering if you giveus a bit more color on fiber opportunities in Europe, in particular, maybe,some, just a general guidance on how we could think about your revenue per newsubscriber and other things that might be driven just by the change in the numberof new additions per year for example?

Jeff, we don’t have a way ofproviding that kind of calculus today. We are probably more driven by CapExspending and obviously correlate better to (inaudible) with test, but I think,my opening comments were that as you know most of the low to marketarchitectures were movement towards (inaudible) to investment a bit come aprocreativity of the North American optics market and well, I wouldn’t say thatwe’ve vest any tipping point in Europe. I would say that theconversations are more somber in sense that we have a lot of copper theapplications space is moving pretty fast and we maybe rethinking what we needto do with fiber. So, I saw a greater level of providing and people sort ofanticipating a future on a shorter horizon than otherwise.

Okay. In previous calls you have talked about suppression of opticalspending and some of your customers, due to their lean manufacturing programs.Just wondering: If you could give us an update on where they are in the processand what you are seeing right now?

We’ve been pretty consistentprobably, I don’t know the end of our last fiscal Q3 that the phenomena wasoccurring, the fact that this quarter, and the quarter prior, were bothevidenced a book-to-bill greater than one obviously there is a sense ofcautious optimism. I think, the majority of the network equipmentmanufacturers, eight of them were going through this kind of process. Themajority of them are well through the midpoint. There are a couple of othersstarting up one or two. But I‘d say that trend line was up and I’d say from thesense of order size we are in a better place than we were several months ago.So, data points are positive

Thanks.

Your next question is come fromthe line of John Harmon with Needham & Company. Please proceed. John Harmon - Needham& Company: Hi, good afternoon.

Hi, Harmon. John Harmon - Needham& Company: I was wondering if you could justoutline the components of what is making your Optical components businessunprofitable, whether its prices or yields or fab utilization or staffing orresidual products just to get a picture of universe the areas to work on. And secondly as long as you comeup with kind of vitality in that kind of business. In other words whatpercentage of your revenues comes from products that were developed within thelast couple of years?

Yeah. We'll take the (inaudible)come out with a specific percentage we for the analysts call on a week or so.But I would say the fact that our growth and bigger, we gave you some numbersof 9 product lines, 12 show growth, 8 of those were double-digit. In general the growth was in theagile optical networks that the things that we have invested in most recentlyas in the last two years versus things that are legacy products. The realmessage is the new items are the ones that are growing in the legacy onecertainly have a slower growth rate. In terms of what we need to workon it I think we gave you pretty good outline of the gross margin in thisbusiness maybe I let Dave try to cover that.

Yeah, John I think I talked myportion here about the incremental savings we expect to have in the Q4, thatthose come from the primarily from the office of comps area. It is gross marginfocus right now, if you look at the numbers it would imply that we needed morethan 121 we have breakeven in the space. We were working towards where weget breakeven number down below the 120 get it and then go to 110 and we workit from there. So, I hope that helps to give you sense of where we think we canmove the breakeven for that business down and that the initiatives in thisquarter are focused on the optical comps gross margin.

John, if you simply go back andlook at the line items that we’ve talked about the majority of them fall in twocamps. One is: we just need more volume to hit the absorption level as Davementioned. The second, and we came a good piece of the way this quarter fromthat. The second is: the majority of them what I’d call operational execution,whether it’s lean, yield, improvement, field materials localization these areall things that happened. But the significant step forwardwas the gross margin and the amount of upside that we had or the growth we hadthis quarter. We actually go through a fair amount of margin dollars,disproportion amount of margin dollars, so that was positive. And secondly, itmigrates to two out of three of our businesses are now in this above 25% range.So, we’ve actually seen progress in terms of doing what we told we do and weare going to keep on those same items that we enumerated. John Harmon - Needham& Company: Okay that does help. Thank you.

Your next question comes from theline of Paras Bhargava with BMO Capital Markets. Please proceed.

Good afternoon, gentlemen.Question on the CommTest business, how much of the growth Kevin was organic andhow much of it was due to the two acquisitions you had in the year?

If you are to take that theyearly run rate of the acquisition certainly it’s probably less than 15 millionand more than 5. And Dave, please correct me if I’m wrong, but, I think that'sroughly the early number so majority of the growth throughout the contest hascome from organic activity.

Okay. It’s relatively total growth giventhe, I think, the 5% to 8% number you are talking about is a pretty goodnumber. Where are you gaining share in that business?

Let me answer different questionor give you another dimension to it and then I will answer your specificquestion. You have to recall that fiscal Q1 of last year we actually have whatwe felt it was adversely low fiscal Q1 a number probably on the order of 10millionish plus or minus a little bit. And the part of it was the bookings justcame in late and we had trouble converting them and at the same time we aredoing it an oracle implementation that has impact on the conversion frombooking to revenue as well. So, part of that, it’s just afact that we will very open that we had execution challenges one year ago. So,if you take that into account and the fact that we’ve a few acquisitions, westill have excellent organic growth but it less toward, I guess. In terms ofwhere we are taking share, I think we’ve been doing a fairly good job on thefield service side. We’ve had a number of great product ramps the MPS 8000 andit’s actually been in all geographical domains, as we talked about on the lasttwo calls.

On the protocol there or thefiscal side?

Both. I would say, we had aresurgence in the, at an optical layer and we both we’ve done had a lot ofsuccess in the cable arena. I think, we’ve mention that several times and thenlastly VoIP as well as video has done well.

And I guess you’re saying, you’reonly going to grow 2% to 3% faster that just caution or I think the share gainis sort of, there's a limit to how much share you can gain?

Make no mistake, we have beenblessed in the success that we've had in cable. So, I think, there is apracticality that all carrier franchises go through these hyper growth periodsfor a protracted period of time. So, all we are simply stating is absent someparticular sector that grows in a hyper way, we are going to be executing alittle bit better than the industry average in both power cautious or justpragmatic way of benchmarking yourself.

Thanks Kevin.

Thanks

Your next question comes from theline of Cobb Sadler with Deutsche Bank. Please proceed.

Thanks for that. Some quickclarification, the near term model, the 2% to 5% operating margin, youindicated you hit that by the end of the year, that’s calendar or fiscal year?

Calendar.

Calendar year. Okay, so right nowyou roughly at what 2.2% operating margin. And now it sounds like you had someone-off, better than unsustainable upside in a couple of your businesses forthe quarter, but literally we should be looking at kind of flat to modestly upoperating margins between now and in December or have you given someconservative guidance there? Thanks a lot.

Our point there was just to saythat the company is taking the next step of being in, what I call, in asustainable model. If you look at the number we had here, the operatingexpenses were not within that model. So, we had two of the three items insidethe model. We now need to get the operating expenses inside the model. So, theimportant part here is that you understand the envelop in which we will workand mix in a segment and mix between the segment and an impact, how those grossmargins fluctuate and therefore the operating (inaudible).

Okay.

You are reading it corrected.

We got inside the envelop, wewould feel it appropriate and wait until we repeated that performance beforebegan to think that we had something sustainable.

Okay, so we just look at it asbasically unchanged guidance for now, that sounds good. Asiawas down a little bit quarter-over-quarter, and it’s kind of evolved thebusiness, but that is no major market share losses there or is itquarter-to-quarter fluctuations or market share losses there, I guess that isthe question.

No market share loses that weaware of, year-over-year its up roughly at 10%, so no real issues there, itjust becomes buying pattern more than anything.

Okay. And last question, on the Picolight acquisition, did you planon using most of the [vickful] there internally or you continue to sell them toPicolight's existing customers and what are you planning on doing with yourcapacity there? Thanks a lot.

We will continue to have amerchant business and tell light sources, whether they be pixels from Picolightor frankly our laser diodes in the telecom side, outside as well as evenvertically integrated. So it will be both.

Got it.

Your next question comes fromline of Dayle Hogg with GMP Securities. Please proceed.

Hi, thanks, can you just give usthe impact on Picolight in the quarter and last quarter we didn’t get itnormalized growth for the [Ops] business?

We don’t really breakup those, wedid have them only in for one month last quarter and now we have them for thefourth quarter. This quarter when we did the acquisition we talked aboutPicolight on an annual basis that's been running at about $40 million a yearrevenue run rate, but we don’t typically go in and breakout the specificperformance of our acquisition.

It would be fair to say that themajority of the growth this quarter from last quarter and I will say a slightmajority came from the organic products. I just think it is $10 million thisquarter and $3 million last quarters. You get about 1% sequential up, but Iguess my questions more around or year-over-year it's about down 19%. I am justwondering what your thoughts on the growth of this business for the full year?

About communications or Picolightspecifically?

On their Optical CommunicationsGroup.

I think it's up. If we executivewell it's going to be in double-digits.

And that’s including Picolight?

Sure.

Okay. Just taking another test ofmeasurement, you said there are sort of [peak-to-need ROE] above 1.1 to 1.2,but because you have to sort of realign the quarters can you think $1 for youwhat (inaudible) we should us?

No, I can't. At the end of theday the physics of what makes the uptick is a carrier budget [plus] in Decemberthat is more associated with the field service product. This year if you wereto go back, you will probably find that fiscal Q3 of ’07 and fiscal Q1 ’08 wererunning neck and neck to be the softest quarters. So I think what we are basicallycoming out with is that we have something this fairly modulated for threequarters and then we have an uptick in that sets of new threshold. So that’sgoing to continue. The use of the lowest to backward looking quarters is the[indicator] and we have our candidates. I think the easiest area to see thepotential for more acquisition tends to be in the Comcast area that is theeconomics are more favorable for consolidation. There is a few large playersand a large number of smaller ones. Optical Coms the profitability has yetoutside the largest in the industry to encourage a prolific M&A other thanit was a surgical fortification. And I think on the more boutiqueoptics businesses that we have, while there could be think that our desirableand small, are you getting them to a do-ability is the harder thing. So Comcastis probably the most likely place for something to occur. I would suggest onthe more modest side, in general and Optical Coms will be a fortifying activitynot for different kind of people like that.

All right. So just picking up theOptical Communications business and industry structure is been unstable quite awhile and you have sort of abstained from being very active in consolidationrather than technology acquisitions. Do you see that landscape changing anytime soon, do you think that level of consolidation is going to accelerate, andwhat could be the catalyst for the pricing in that environment do actuallyimprove?

I don’t think there is enoughconsolidation that could occur over an investors' horizon, let’s call that:three years to change the pricing dynamic. To be specific about answering yourquestion: what conditions would change the potential for mergers oracquisitions? I believe that as each company becomes more profitable and astheir portfolios disperse and there is less overlap. Right now we have a lot ofplayers that try to look like everyone else. As there is less overlap and thegross margins go up, that could encourage more consolidation in that space. Butwe are not exactly there yet. Hope that helps you.

Yeah, got it. And then onequestion about the tax rate. You've been profitable right now on a GAAP basis,actually not sustainably so. But at what point, how many quarters ahead wouldyou have to get to before you start switching over to set of regular pro formatax rate, stop taking a reserve against your taxed asset.

Yeah I think, it depends on anumber of factors right where is the profit coming from, whether the revenue Ishould say that US based, you have got in lot of losses then we start to haverelease evaluation reserves. So it's going be a big for we see that tax rate goup because as we get profitable within each country then we have to releaseevaluation allowances we can offset the provision. So its going to be a bit to tellyou what every time we have on the call to give you a view of what the taxrange will be, so that you can start to see it when its starts to be realizedbut really is where calling where the profits are going to be realized, in themore business I do in the US about tax for pay for a while.

Right, when we are assuming ourtax rate on over the next two to three years, is it fair to take it from the12% range right now, take it through, somewhere in the instead of high teensall the way up to 30% over three years.

That would see little bitsteepening.

Okay, I got it. Thank you so much.

The next question comes from theline of Subu Subrahmanyan with Sanders & Morris. Please proceed Subu Subrahmanyan - Sanders & Morris: Thank you. I have a question ongross margin first, if you can talk about kind of the offsetting factors whichwould make gross margin potentially go down from the levels this quarter youhave, I know you mentioned how your AOT margins, but with higher revenuesoverall especially in Optical Com would that offset it. And then I wanted toask about headcount came down about 200, do you see the benefit of lowerheadcount and OpEx in the September quarter or some of that roll into December?

First of all, in the headcountarea, again I stated is mostly not positive mostly a gross margin benefit grewup as we lowered our cost structure in our manufacturing area. So that’s theheadcount. As far as gross margins go thekey about the product mix is if you have more Optical Com's business growingyou’re going to likely put a waiting although its positive is an absolutedollar amount you will have waiting down on the overall gross profit of thecompany. So that’s why we make that point and it is very important about themix of the segment as far as we’re waiting on the revenue. Subu Subrahmanyan - Sanders & Morris: Got it and, just a follow-up ifyou, longer term ranges in terms of operating margins can you talk about kindof timeframes between your near-term range and the longer term range and whatare some of the things specifically on the gross margin side that need tohappen to get there?

Well, the things we have talkedabout before you expect it, each of the groups have gross margin opportunity inthe CommTest area, in the AOT it's in the single-digit type range and actuallyin the last quarter AOT picked up a couple of those points. So it’s very in thefew digits in the lasers and the Optical Coms area its double-digit improvementopportunity so far. We saw way to go in both of those segments as far as grossmargins go and we have talked about at the end of calendar '08 being a periodwhere not necessarily in a sustainable business on a sustainable basis but weshould be able to be in the ranges that we talked about for gross margin andfor operating income. Subu Subrahmanyan - Sanders & Morris: Got it, thank you.

Ladies and gentlemen thisconcludes our Q&A session. Thank you for your participation in today'sconference. This concludes our presentation and you may now disconnect and havea good day.