Good day, ladies and gentlemen, and welcome to the JDSU Third Quarter of Fiscal Year 2009 Earnings Conference Call. My name is Alicia, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator instructions) As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the presentation over to Ms. Michelle Levine, Director of Investor Relations. Please proceed.

Thank you, operator, and welcome to JDSU's fiscal 2009 third 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 February 10, 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 noon everyone. Let me begin by summarizing our third fiscal quarter results. Despite the tough economic conditions, we continue to improve a number of our key financial metrics. We grew net cash by over $34 million and were over $15 million free cash flow positive. We decreased our inventory levels by $40 million, DSOs were down by three days and our long-term debt declined by $50 million. In effect, our balance sheet improved in Q3. Our revenue and operating income results were consistent with the guidance we provided three months ago reporting revenues of $280.7 million and an operating loss of nearly 3%. As expected, demand from our NAM [ph] and service provider customers slowed due to the economic downturn as our customers are depleting their inventories and delaying their release of their 2009 capital budgets. We did see an increase in demand over the last two months across our businesses. JDSU's third quarter gross margins were slightly below 42% due to lower factory absorption and product mix in the test and measurement segment and transition costs associated with the transfer to contract manufacturers. We remain committed to our sustainable model of gross margins in the range of 43% to 47%. Operating expenses of $125.2 million were down for the third quarter in a row and reduced over $22 million or 15% from the fiscal 2008 third quarter reflecting the company wide effort to continue to lower our cost structure. Although we find ourselves in a changing economic climate, I believe our long-term market opportunities remain strong. Since January, I have spent time meeting with customers across our business segments. In my meetings with our telecom and cable customers who drive revenue for 80% of our product portfolio, I noted that while these customers remain…

Thank you, Tom. Before I start, please note that all numbers are non-GAAP unless I state otherwise. Third-quarter revenue of $280.7 million was down when 21.4% from the prior quarter and down 26.9% when compared to the third quarter of fiscal 2008. As expected, the third-quarter revenue decline was mainly in the CCOP and test and measurement segments, as demand continued to soften. For fiscal Q3, test and measurement represented 46% of total revenues as compared to 49% in the prior quarter. The CCOP segment represented 36% of total revenue unchanged compared to prior quarter and AOT represented 18% of total revenue compared to 15% in the prior quarter. Third-quarter gross margin of 41.8% of revenue was down from the previous quarter's gross margin of 43.5% and down from the third quarter fiscal 2008 gross margin of 42.6%. The third-quarter gross margin reflects the impact from lower factory absorption, unfavorable product mix in the test and measurement segment as well as transition costs associated with the move to contract manufacturers. Operating expenses for the third fiscal quarter of $125.2 million or down nearly $12 million from prior quarter's $137 million and down over $22 million from the prior year's $147.6 million. The lower operating expenses reflect reductions in discretionary spending, office consolidation, workweek shutdowns, and reductions in headcount. Our operating loss for the quarter of $7.8 million or a negative 2.8% of revenue was down from the prior quarter's operating profit of $18.4 million or 5.2% of revenue. Our operating loss was due to lower revenue and gross margin. We reported a net loss for the third quarter of $6.9 million or a loss of $0.03 per share. This compares to second quarter of fiscal 2009 net income of $24.8 million or $0.11 per share. A detailed reconciliation of our…

(Operator instructions) And the first question comes from the line of Mr. John Harmon with Needham & Co. Please proceed. John Harmon – Needham & Co.: Hi, good afternoon.

Hi, John.

Hi, John. John Harmon – Needham & Co.: Well, first of all I would just like to say thank you for giving us some margins in your targets and business model, it makes things a lot easier.

You are welcome. John Harmon – Needham & Co.: And onto my questions, so if we look at your book to bill ratios for the two divisions that are less than one, which one is the smallest? How would you rank them?

How would we rank the delta of less than one? John Harmon – Needham & Co.: In other words, which book to bill ratio is lower, optical communication or test and measurement for the June quarter?

They are both relatively close to each other, just slightly under John. John Harmon – Needham & Co.: Okay, thank you. And in the transfer of your Shenzhen and factory to Sanmina, you probably have to pay them some kind of transition fee in the meantime. You talked about the total $35 million annual savings for everything you're doing, but how much are you going to have to pay them in the short term, or how does that agreement work?

John, so we have with the agreement, we negotiate a certain rate that we will pay them for product since it's already in Shenzhen and really it is them taking over the labor, what I would say the typical transition costs of let us say moving from the US to some other part of the world isn't there. So it is actually a pretty straightforward as far as that goes. There wasn't any incremental charges that we had to pay them. Now we will keep some people there to help with the transaction so that's a small incremental cost that we will incur temporarily as we bring people up to speed and we have some of our own employees there for that period. John Harmon – Needham & Co.: Just is a follow-up if I may and you talked about some transition costs in moving CM that hurt your margins in the quarter, how big were those?

Those are less than 1% of the total revenue and primarily we had Benchmark come in and take over our factory in Indiana, so they are going through the transition of running the product and now moving the product in Indiana from there to their facilities. John Harmon – Needham & Co.: Okay, thank you.

Next question please.

Thanks, John.

And your next question comes from the line of Kim Watson [ph] with JP Morgan. Please proceed. Kim Watson – JP Morgan: Thank you. I wanted to ask a little bit about I guess confining two of the comments about bookings improving over the last two months combined with some earlier comments about your customers plus and what's fixed on my mind it that test and measurement in the optical communication can that be tied together? I guess the real question I'm trying to get at is have you seen an improvement related to the fact that inventories are kind of reaching bottom at this point and where do you think we are in that process?

Well, we definitely have seen improvement in the last two months of order intake rate across both test and measurements and optical comms business. So I don't know that that in itself is a trend at this point. We're still cautious but it has definitely improved significantly in these last two months. Kim Watson – JP Morgan: Okay. I guess in the mix in your revenue guidance which is down at the mid point sequentially again, are you expecting weakness in both of these business or do you expect any seasonality in the P&L [ph] given its fiscal year (inaudible)?

For the forecast that we have shown for the fiscal Q4, we see test and measurement rebounding a little bit better than the optical comms business at this time. Kim Watson – JP Morgan: Okay.

Next question please.

And the next question comes from the line of Mark Sue with RBC Capital Markets. Please proceed. Joan – RBC Capital Markets: Hi, this is Joan [ph] for Mark Sue. Can you help us understand the moving parts in your revenue guidance? Clearly taking the midpoint, it seemed like the rate of sequential decline is beginning to moderate. Looking further out, can we start seeing a sequential bounce in revenues?

You know, we feel that the market is still a bit hazy as we look out further over next quarters beyond the June quarter. So we are not providing any specific items on those quarters at this time.

Also, if you look at the revenue we just did, understanding that $3.4 million of it relates to the Nortel bankruptcy, so that we don't expect to get a benefit from any recovery there in the quarter ended June. And as Rom mentioned, the test and measurement business is usually more stable relative to the optical comms in the June quarter because the budgets have rolled out and so we feel that the softness that we're seeing in the June quarter is primarily around the optical communications business. Joan – RBC Capital Markets: And looking out into the fourth quarter, can we expect any more from you in terms of revenue from the pre-petition claim?

You know, right now, we're going through the process on the Nortel situation. So as we get better visibility there, we will share that with you, but right now we are not expecting anything for the June quarter. Joan – RBC Capital Markets: Thank you.

Thank you.

And the next question comes from the line of Todd Koffman with Raymond James. Please proceed. Todd Koffman – Raymond James: Thank you very much. Over the last I guess nine months or so, you have in the optical communications segment, some of the wounded players combined, and I guess all the wounded, but anyway, do you think that the combination of the now players, small number of players, will be helpful to the market or everyone is still struggling, losing money with comfortable cash positions, so the dynamics of that business might not change?

I think first of all consolidation is a good thing because there is a very fragmented market with lot of players, so consolidation is a positive for the market. I think it is still yet to be seen how it plays out. I think some of the players in the market in that particular business don't have healthy cash positions, so I think it also depends on how long we remain in these strong headwinds from the macroeconomy to see how they fare in the marketplace. Todd Koffman – Raymond James: Just a quick follow-up, JDSU over many years has been reorganizing, restructuring, lean initiatives, global realignment, now you are going through an outsourcing program, when might you think – but you have a fresh start here with yourself, when, how long might it be until you think the organization can settle into some steady-state organization? How much time…

I think we are settling in. You know the lean initiatives to me are really cultural. They are ongoing. So it is a culture you build inside and I think we have good foundation for that and good traction. I think the other areas, innovation, where we're focusing very heavily and I think our employees are very engaged in that. So I think if you look at our four focus areas that we identified, we have strength and we have a strong foundation now that we can move forward off of. We always adjust to extreme market conditions like we have right now but I think on an ongoing basis you have the right vision and a culture set and we're moving forward.

Next question please.

And the next question comes from the line of Paul Bonenfant with Morgan Keegan. Please proceed. Paul Bonenfant – Morgan Keegan: Yes, hi thanks. The first question is more of a housekeeping, when you talked about the $3.4 million benefit from the Nortel revenue that came in this quarter relative to the $10 million deferred last quarter, I am assuming that you had booked the COGS last quarter, so excluding that revenue, where would have margins have been in the quarter for optical communications or am I not thinking about this correctly?

You have got it pretty close with almost all that revenue had was 100% margin, not quite all of it, a majority of it, so the margins would still have been up quarter to quarter, they would have been over 18%. Paul Bonenfant – Morgan Keegan: Okay. But that $3.4 million flowed down all the way through to EBITDA?

The majority of it did. Paul Bonenfant – Morgan Keegan: Okay. Next question, I guess along the lines of housekeeping, you talked about your cost savings in the model being up to $35 million in the manufacturing line, $120 million on the OpEx line, I just want to make sure I understand this is up relative to your last forecast for $28 million and $110 million, is that correct, for those two items relatively?

That is correct. Paul Bonenfant – Morgan Keegan: And this is a relative to the fourth quarter of fiscal 2008 and what quarter do you expect to realize these?

We will be at run rate in our fiscal fourth quarter. Paul Bonenfant – Morgan Keegan: Okay. And last question, it would seem that if your revenues were to increase sequentially, do you have a sense for how much of that is as a result of improving end market demand versus an inventory or channel restocking?

You know, that would be contingent on which products you are seeing the demand increase, et cetera. So as those events happen and we report our next quarter results, so we will certainly give comment of where we saw the variations and we will help with understanding what was inventory re-stocking and so forth. So as we get that visibility we will share that with you on the next call. Paul Bonenfant – Morgan Keegan: Thank you for taking my questions.

Thanks Paul.

Our next question comes from the line of Jeff Evenson with Sanford Bernstein. Please proceed. Jeff Evenson – Sanford Bernstein: Hi. I was wondering if you could go over some of the details of your significant inventory decline, and specifically how much of that is from transferring inventory from your factories over to the contract manufacturers.

Sure. Roughly $13 million to $14 million of it is a reduction of total inventories for us and the remainder was primarily a transfer of inventories to the contract manufacturers. Jeff Evenson – Sanford Bernstein: In your contracts with the manufacturers, what happened if that inventory becomes obsolete in terms of financials for you guys?

So typically they even have a shorter window, right. We look at something that doesn't have demand in a 12 month period. They usually look at something where they're holding it and was supposed to ship within a 60 day or 90 day period, but if it hasn't gone, then there is a – they have the right to call put back that inventory on us. So it really will driver us to have tight coordination with our CMs on the MRP or the demand that we provide them to make sure that we're moving that inventory with them in an expeditious fashion. Jeff Evenson – Sanford Bernstein: Thank you.

(Operator instructions) And the next question comes from the line of Ajit Pai with Thomas Weisel Partners. Please proceed. Ajit Pai – Thomas Weisel Partners: Yes, good afternoon. A couple of quick questions. The first one is just looking at your business model you talked about $400 million – at a $400 million quarterly revenue run rate, you will have a gross margin of 46% and operating margin of 10%. But just looking back at the December quarter of 2007, at under $400 million in that quarter, you had a 46% plus gross margin, and you had 11.4% operating margin. Since then you have restructured quite materially, you have cut costs, you have done a lot of work, hard work. Why would your business model not be more optimistic than what you're projecting right now at $400 million ?

So in that $400 million, it has a lot to do with what we call a sustainable model that we're putting in place. So if you look back in December period, you had quite a leap in the revenues from the comm test business with no change in our R&D investments. So we're looking at it as a more sustainable model, not to say that at periods of time if revenue hit certain levels could it be better, that could happen, but we are trying to talk about the model that we are driving the company towards, so that we have the R&D investments we want to have, we have the compensation models we want to have for the employees, and we have got to assume that there would be a more balanced revenue versus – in that quarter, I think 50% of revenue was from comm test. Ajit Pai – Thomas Weisel Partners: Right, okay. But from an overall profitability perspective, you would expect every business that you had other than comm test to be more profitable relative to the levels of profitability in that particular quarter?

Sure. Ajit Pai – Thomas Weisel Partners: Okay. And then just looking at the comm test business, while you provide some commentary on overall weakness in that side, could you give us some color as to how much of that was cable and how much of that was telecom, the weakness?

You know we really haven't been splitting it out in the past but I would say that the cable market over the last two quarters has been pretty depressed compared to the telecom market.

And we saw some recovery in the December quarter as we noted in the call in Latin America and Europe, but generally speaking it has been in a more depressed mode. Ajit Pai – Thomas Weisel Partners: Got it. And then shifting over to the M&A environment, one of the uses of cash that you have talked about in the past is making – using it for acquisitions. So your balance sheet is being – you have been shoring up, and you are cash flow positive, so could you give us like sort of some color on the kind of acquisitions that you're looking at and whether you're closer to making additional acquisitions or further away than you were a couple of quarter ago? And then also for next quarter, the next few quarters, do you expect to stay cash flow positive?

Yes. First of all, I will talk about the M&A part and then I will turn it over to Dave on the cash flow. But we are looking strategically across all of our business segments for opportunities. I think it is fair to say in that in this environment, there are more opportunities today than there were six, twelve months ago, and we're evaluating that. But we are making sure that in that vein that we're looking at it strategically and not just grabbing on to opportunities because they are out there. But it needs to fit in into our overall strategy and to be profitable overall for the company.

And from the free cash flow standpoint, we are now lower at the $275 million to $285 million level. Our goal is to make sure we can be break even or generate cash every quarter. So as we go through every quarter, if we make further adjustments to our cost structure, we will comment about how we move that free cash flow breakeven point. Ajit Pai – Thomas Weisel Partners: Right. But for the next quarter you do expect to be free cash flow positive?

For the next quarter, I expect the free cash flow breakeven to be $275 million to $285 million and that the revenue range to be to $265 million to $285 million. Ajit Pai – Thomas Weisel Partners: Got it. Thank you.

Thanks.

Ladies and gentlemen, this concludes the question and answer session of today's conference. I would now like to turn the call over to Mr. Tom Waechter for closing remarks.

Thank you operator. As our call concludes, I would like to follow up with a few summarizing points. There is no doubt we continue to face challenges among the current economic backdrop. However, at the same time, we're successfully improving our financial model with our lean initiatives and cost-cutting programs. We were able to force produce positive free cash flow and further strengthen our balance sheet during this challenging quarter. It is our goal to continue this trend. Clear evidence of the leverage in our operating model is expected to be more apparent once the top line improves which brings me to my last point, our long-term market opportunities remain strong. We are participating in markets that have healthy growth potential. Our continued focus on innovation will enable us to grow our market position as the economy improves. Thank you again for joining us today. We appreciate you taking the time and your interest in JDSU. Have a good evening.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.