Good day, ladies and gentlemen, and welcome to the JDSU fiscal 2009 second quarter earnings conference call. My name is Khama [ph], and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator instructions) As a reminder, ladies and gentlemen, this conference call is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. Michelle Levine, Director of Investor Relations. Please proceed.

Thank you, operator. And welcome to JDSU's fiscal 2009 second quarter financial results conference call. Joining me on the call today are Tom Waechter, Chief Executive Officer, and Dave Vellequette, Chief Financial Officer. I would like to remind you that this call is likely to include forward-looking statements about the future financial performance of the company. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to look at the company's most recent filings with the SEC, particularly the Risk Factors section of our report on Form 10-Q filed today, February 5, 2009, and in our most recent annual report. The forward-looking statements, including guidance, provided during this call are valid only as of today's date, and JDSU undertakes no obligation to update these statements as we move through the quarter. Please note that all numbers are non-GAAP unless otherwise stated. A detailed reconciliation of these non-GAAP results to our GAAP results as well as the discussion of their usefulness and limitation is included in today's news release announcing our results available on our website at www.jdsu.com. Finally, and as a reminder, this call is being recorded and will be available for replay from the Investor portion of our website at www.jdsu.com/investor. I would now like to turn the call over to Tom.

Thank you, Michelle, and good afternoon. I’m pleased to be here today leading JDSU and discussing our fiscal Q2 results and future outlook. In the coming weeks and months, I look forward to meeting many of you on the call today. As you may know, I joined JDSU 15 months ago to lead our Communications Test and Measurement business. I joined JDSU because of our strong employee talent pool, the breadth and depth of our products and technologies, and the significant opportunity to increase the value of the company. During the first 15 months, my conviction has grown even stronger. I see the great potential of this company through our people, the ability to innovate, and the power of our global reach. Our strong balance sheet, aggressive cost saving programs and strategic focus will allow us to weather the current global economic headwind as we build the foundation for long-term success. Before I talk more about our business, I’d like to take a few minutes to describe the format of the call. Many of you have provided us with suggestions pertaining to the content we share with you on earnings call and we have taken note. Moving forward, we intend to provide more insight into each of our businesses and the respective trends. I will spend most of my time on this and future calls addressing these trends and how they are shaping our strategy and our priority. My formal remarks today will be more extensive than I plan on future calls as I’d like to spend time at the outset to help you understand my perspective of the business. Following my discussion, Dave will provide a detailed review of the current quarter’s financial results and our outlook. Let me start by providing a high level overview of JDSU’s second…

Thank you, Tom. Before I start, please note that all numbers are non-GAAP unless I say otherwise. Second quarter revenue of $357.2 million was down 6.2% from the prior quarter and down 10.5% when compared to the second quarter of fiscal 2008. The second quarter revenue decline was mainly in the CCOP segment, as demand softened with the economic downturn and we deferred $10 million of Nortel revenue. Given the Nortel bankruptcy filing last month, we not only deferred $10 million of revenue, we also deferred $10 million of gross profit and operating profit, lowering their margins by approximately 150 and 260 basis points respectively. Earnings per share were reduced by $0.04. For fiscal Q2, Test and Measurement represented 49% of total revenue as compared to 43% in the prior quarter. The CCOP segment represented 36% of total revenue as compared to 43% in the prior quarter. And AOT represented 15% of total revenue, which is relatively unchanged from the prior quarter. Second quarter gross margin of 43.5% of revenue was up from the previous quarter’s gross margin of 43.3% of revenue and down from the second quarter of fiscal 2008 gross margin of 46.3% of revenue. The second quarter gross margin reflects a favorable segment mix as the Test and Measurement segment increased as a percentage of total revenue and the execution against our lean initiatives. Operating expense for the second fiscal quarter of $137 million or 38.3% of revenue was down from the prior quarter’s $144.6 million and down from the prior year’s $139.4 million. The lower operating expenses reflect reductions in discretionary spending, office consolidation, workweek shutdowns, reductions in headcount and the favorable impact from foreign exchange rates. Operating income for the quarter was $18.4 million or 5.2% of revenue, down slightly from the prior quarter’s $20.4…

(Operator instructions) And the first question comes from the line of (inaudible) from RBC Capital. Please proceed. Mark Sue – RBC Capital Markets: Hi, it’s actually Mark Sue from RBC Capital Markets. Can you help us understand the moving parts in your revenue guidance? If I take the low end, it implies an almost 23% sequential decline. Recognizing it’s tough out there, it can’t all be the macro and you should be able to recover some of the deals which kind of delayed. Maybe if you could quantify some of the inventories that your customers and maybe the impact of portfolio pruning? Any further granular details you could provide would be helpful.

Mark, this is Dave Vellequette. So – as far as the deferred revenue, we do have – we are going through the normal legal processes there to try to recover some of that $10 million. From what we have identified, we think there is $4.4 million roughly to $5.0 million that gets a – it’s called a pre-petition claim and – but as far as when we will actually be able to realize that, it could be in Q3 or Q4. As far as the reduction in the revenues, as I stated right at the end there, we are basically seeing that the percentage decline to be even between the Test and Measurement and the CCOP group. In the CCOP reduction, we think there is about another $5 million impact from product pruning included in the number.

Mark, I’d just add to what Dave is talking about also on the Comm Test side, I think you know that the March quarter is when budgets are typically released for the network operators. And due to the economic conditions today and when those possibly would be released that they are released later into the quarter, further into March than (inaudible) revenue range – Mark Sue – RBC Capital Markets: Okay, that’s helpful. And then with that being said, does – do you – will you start seeing at least a sequential balance in the June quarter? At least you had some confidence there from your initial discussions with your customers. And then lastly, Dave, as you consider data response, maybe just your overall gross margins as we exit fiscal 2009, that might be helpful.

Yes, Mark, we are just right now with our visibility, and as has been our habit, we talk about one quarter at a time. And so right now it’s best that we just focus on our Q3. And the gross margins are – I’ll try to give some insight of what could impact the gross margins, and basically we only give guidance on the revenue and the operating margins. Mark Sue – RBC Capital Markets: Okay. And then – but the impact –

Operator, next question please.

And the next question comes from the line of Ehud Gelblum from JP Morgan. Please proceed. Ehud Gelblum – JP Morgan: Hi, guys, how are you?

Hi, how are you doing? Ehud Gelblum – JP Morgan: Good. Couple questions. One of the margins you said you are now with a sustainable business model for 10% operating margin, but you need a $400 million run rate. With the downturn in the markets, what makes you confident that you cannot get anywhere near $400 million going forward? And that you are down to the $300 million range, how do you know that kind of we are not – as inventory levels come down, we are not going to permanently down in the low 300. At what point would you make that decision and cut costs? And the flipside of that – or the other side of that coin, it sounded like you are expanding more and going more international. Is this really the wisest time for you to be spending on international and spending on R&D rather than kind of cutting back in costs and try to save some of the margin?

Let me take the second part of that question regarding the R&D and the international scope. Most of our infrastructure is already there from an international standpoint. We had over the last 6 to 12 months rebuilt quite a bit of our leadership team, especially in the Asian market. But we don’t believe there is any significant additional incremental investments we need to make really expand our presence in the global market. I think it’s really more of a focus from the top down through the organization, more of an emphasis of focusing on those areas and gaining market share there. As far as R&D, as I mentioned, that’s one of our 4Q priorities that we continue to invest in innovation. And we believe that during these uncertain times, while maybe some of our competitors out there in the market are having difficulty investing into innovation and R&D. That’s a good sign for us to look at the ratings and technological gaps. So think we found enough areas through our lean initiative and other cost reductions and we don’t really need to cut into our R&D or see the need to do that.

On the first part of your question, Ehud, one, we’ve got ourselves structured as we have talked on a number of calls for 10% and 400. Second part, if – as you see the – where we’ve guided for the revenues, we are taking steps to continue to lower our breakeven point for the company to the $300 million to $310 million range, which is where we are at right now, and we want to bring it down even further as we exit the fiscal year. So we’re continuing to work on lowering our costs. If – as our business – as we go through the quarters and our visibility improves, we’ll take the appropriate steps to – with regard to our expenses. Ehud Gelblum – JP Morgan: Okay. I got one last question on the top line if I could. The Test and Measurement business was obviously very strong this quarter and yet it’s going to fall off pretty precipitously along with optical components next quarter. Was there ever a sense in this particular quarter that these were either last time buys or something going on that was keeping it while your optical components was falling off, the Text and Measurement business was continuing to do well right before a cliff? Was there any sense that maybe there was some extra buying last quarter just before calendar 2008 reasons that may not return?

No, there wasn’t any indication of that. As a matter of fact, last fiscal – December or last calendar December quarter, we did see quite a bit year-end buying, consuming our budget. We did not see that to any great extent this year. We do see some pretty strong business out there from communications – Comm Test business didn’t get an indication that (inaudible). Ehud Gelblum – JP Morgan: Okay, thank you.

Next question, please.

And our next question comes from the line of Ajit Pai from Thomas Weisel Partners. Please proceed. Ajit Pai – Thomas Weisel Partners: Yes, good afternoon.

Good afternoon.

Hi, Ajit. Ajit Pai – Thomas Weisel Partners: A couple of quick questions. The first one, just looking at the sort of market segments for your Test and Measurement and Optical Communications group, was there a pattern that you observed at the slowdown and push-outs? Were they more on the MSO side? Were they more than sort of large US carriers? Were they going to be centered in any one particular geography?

We saw some strength in the Latin American market around the cable product, cable test product. So that was definitely a strength for us last quarter. So that was probably the first quarter and three or four quarters where we actually saw a pickup in the cable test product. So that was a definite improvement. We did see softness in our service assurance business and lab and production, which we would expect to see in the kind of a soft (inaudible). Ajit Pai – Thomas Weisel Partners: Right. And then just looking at the M&A environment right now, there has been a lot of consolidation on the optical communications industry, the component industry. Could you give some color as to uses of your cash right now? You’ve been quite aggressive I think in buying back your own debt. So does that mean that you’re not looking at further business development activity? And also, how do you think that some of the recent announcements over the past three to six months positions JDSU in terms of market share?

I’d take the first part of that and I’ll turn it over to Dave. From an M&A standpoint, we continued to look at the market. We have been a strong player in that area in the past. As I mentioned, we will make sure that it fits into our strategy as we go forward and that it’s accretive to the business if we do decide to make any moves from an M&A standpoint.

And as far as – what we’ve always said is, our first goal is to grow the net cash, which we have done. The next is obviously we took advantage we believe of an opportunity to buy back some of the 1% notes. And we will be using our cash also for our restructuring purposes as needed. And then as Tom said, if the right opportunity is out there, we will be looking at those actions as appropriate. Ajit Pai – Thomas Weisel Partners: Right. And then the breakeven level that you just indicated of having reached the $310 million sort of level already, could you give us some color as to that’s after Shenzhen is out or for this quarter is your breakeven level, for the March quarter is your breakeven level $310 million? And then also I think you mentioned you have another $15 million to $20 million that you are planning to drop to breakeven. So that would be $290 million $295 million exiting the year. Does that mean for the full quarter, the June quarter, that you will have a breakeven level that’s at $290 million to $295 million?

Yes. So as you can tell from the guidance where we gave the guidance $275 million to $300 million, and I gave operating margin guidance of zero to minus 4%, that should be obviously – we think that we’re at that breakeven point at the $300 million, $310 million mix always going to have an impact on it. And then as we exit the June quarter with the changes we are making not only to Shenzhen but other activities we have going on, we think we will exit it with the opportunity of having that breakeven lower by $15 million to $20 million. Ajit Pai – Thomas Weisel Partners: Got it. Thank you.

You’re welcome.

Next question please.

The next question comes from the line of Paul Bonenfant from Morgan Keegan. Please proceed. Paul Bonenfant – Morgan Keegan: Hi, thank you. You talked about OpEx reduction sequentially. I was wondering if you could talk about the context of percent of sales. Would it be similar to what we saw this quarter?

I don’t think I talked about it other than it will be coming down. Paul, we are taking out the equivalent of $110 million a year run rate as we are going to exit the fiscal year. So we didn’t talk specifically about what the OpEx would be. It will be coming down quarter-to-quarter. To get the $128 million, I have to go to a run rate about $124 million, $125 million for the fourth quarter. So – I just finished $137 million. So I’ll be heading towards the 120 – $124 million, $125 million range from here to the fourth quarter. So it will be somewhere in between those two. Paul Bonenfant – Morgan Keegan: Okay. And just a quick question of clarification on your $110 million a year in savings exiting the year, that’s relative to which quarter?

To the fourth quarter last year where we did $151 million of OpEx. Paul Bonenfant – Morgan Keegan: Okay. And last question is, if the downturn is prolonged, have you considered next steps for cost reduction or aligning costs with a lower revenue base, maybe additional product pruning or considering shutting business units?

As I stated on a previous question, with our visibility as we go through we will constantly be looking at opportunities, as I noted in the script, that we had a set of actions. We added to those actions in the quarter. And that’s what we are constantly doing. As our visibility comes through, we will continually evaluate the business because we’re looking at where the profitable businesses are and we will make adjustments appropriately.

I think I’ll add to what Dave was saying. I think on a lot of our lean initiatives, we are just starting to see some of those benefits. A lot of the manufacturing outsourcing will really start seeing larger benefits over the next quarter. Paul Bonenfant – Morgan Keegan: Thank you for taking my questions.

You’re welcome.

(Operator instructions) The next question comes from the line of Natarajan Subrahmanyan from SMH Group. Please proceed. Natarajan Subrahmanyan – SMH Group: Thank you. I have two questions. First, if you can talk about your OpEx again, you are reducing headcount by almost a third, going from 6,600 to 2,200 people going off of the payroll. Can you talk about how this will offset gross margin versus operating expense? Imagine a significant decline to OpEx because you are outsourcing these components versus making them internally, will it hit gross margin OpEx? Or are most of these employees already cost to goods sold since they are in the manufacturing side?

Yes. The – of the 2,200, the majority of them being from the Shenzhen facility, right, where we had – and I stated that more than 2,000 employees will transfer. So the remaining 200 – the majority of the remaining 200 will be in the OpEx area. Natarajan Subrahmanyan – SMH Group: Got it. So we won’t see the impact of that on the OpEx, the other 2,000 on the OpEx side because they were on cost of goods sold. And can you talk about what kind of deals you’ve struck with Sanmina for the Shenzhen facility, what kind of pricing you guys look at in kind of broad strokes?

Basically we haven’t actually revealed specific terms of it. It’s contemplated in the – number one, I said that as we complete these initiatives we should be able to reduce our manufacturing cost structure by $28 million on an annual basis. Natarajan Subrahmanyan – SMH Group: Understood. And then, Dave, can you repeat what you said in terms of the negative gross margin impact of the Nortel deferred revenue, what kind of impact it had on the December quarter and what kind of recovery you think could happen over the next couple of quarters?

When we deferred the revenue, obviously since they have the inventory, we deferred 100% of the revenue obviously hitting gross profit. And that hit obviously went all the way down to operating margin. So that’s why I said it’s a $10 million impact on gross profit and operating margin. As I said previously, we have some – we are going to the normal legal process here and there is a $4 million to $5 million that’s identified. It’s what’s called pre-petition claims, and we hope that we will be able to get those paid for because of all the bankruptcy laws work. And then the rest of that will be handled how the bankruptcy proceedings typically go. As far as when we get any of that money, we don’t know at this time. Natarajan Subrahmanyan – SMH Group: And a final question if I could get one in, you are taking a breakeven point down. It seems like kind of a $280 million to $290 million kind of range, which is where the midpoint of the guidance for the March quarter is. Should we read into that that you are expecting things to flatten out versus March levels? Should we expect to see some sort of bottoming in March in recovery from there on to June? If you could talk in general about the outlook, I know you are not giving specific guidance, but anything would be helpful.

I think that – what we are trying to communicate is how we normally go about our process of our visibility and the guidance associated with that visibility. And then we are letting folks know that given that, that we’re going to continue to adjust our cost structure, so – and take our breakeven point down further. Natarajan Subrahmanyan – SMH Group: Got it. Thank you.

And we have no more further questions at this time. I would like to turn the call back over to Ms. Michelle Levine Schwartz. Please proceed.

Thank you, operator. We would like to thank you again for joining us today and we appreciate your interest in JDSU. Thank you.

This concludes the presentation for today, ladies and gentlemen. You may now disconnect. Have a wonderful day.