Good morning. At this time I would like to welcome everyone to the ADTRAN First Quarter 2008 Earnings Release Conference Call. (Operator Instruction) During the course of the conference call ADTRAN representatives expect to make forward-looking statements which reflect management’s best judgment based on factors currently known. However, these statements involve risks and uncertainties, including the successful development and market acceptance of new products. The degree of competition in the market for such products, the products Intel mix, component costs, manufacturing efficiencies and other risks are detailed in our annual report on Form 10-K for the year ended December 31, 2007. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements which may be made during this call. Thank you. I will now turn the conference over to Mr. Tom Stanton, Chairman and CEO. Mr. Stanton, you may begin.

Thank you, LaTonya. And good morning everyone. Thank you for joining us on our First Quarter 2008 Conference Call. With me this morning is Jim Matthews, Senior Vice President and Chief Financial Officer. During the first quarter momentum in our growth businesses, including broadband access, optical access and internetworking allowed us to overcome the seasonal decline in revenues we typically see at this time of year. Combined, our businesses were able to achieve a 44% year-over-year revenue increase, reaching a new record level for the company. As we enter the second quarter our growth businesses now represent 46% of our total company revenue; again, a new record. This level compares to just 34% for the same period last year. Our traditional product areas saw mixed results. HDSL, the largest component of our traditional product area, had a strong quarter after a relatively weak fourth quarter. Our Legacy Enterprise products reflected the impact of seasonality, compounded by the effect of a soft enterprise spending environment. This product area represented less than 10% of our total revenue in the first quarter. Now, moving on to some specific categories--as a result of continuing share gains in all our key market areas, our broadband access business produced another record revenue quarter as shipments of our 1100 Series fiber-to-the-node products and our Total Access 5000 Multi-Service Platform expanded. Our 1100 Series products continue to grow in fibers-to-the-node applications, addressing the move to upgrade bandwidth for delivery of new services and to meet expanding competitive demands. On the development front we began carrier trials with our new 1124P Broadband Media Gateway and our new 1124D [inaudible] High Speed Platform. We believe the 1100 Series products continue to show significant growth potential, both domestically and internationally. Moving on to the Total Access 5000 family, the quarter saw…

Thank you, Tom, and good morning everyone. Revenue for the first quarter increased 9% to $119.9 million compared to $110.3 million in Q1 2007 and increased sequentially from $119 million in Q4 2007. Broadband Access product revenues for Q1 2008 increased 57% to a record $28.6 million compared to $18.3 million in Q1 2007 and increased sequentially from $27.3 million in Q4 2007. Comparing Q1 2008 to Q1 2007 the significant increase in broadband access product revenues is primarily attributable to 1100 Series fiber-to-the-node upgrades, rollout of Ethernet over copper services, and broadband digital loop carrier applications. Comparing Q1 2008 to Q4 2007 the increase in broadband access product revenues is primarily attributable to the effect of the 1100 Series fiber-to-the-node upgrades, rollout of Ethernet over copper services, and broadband digital loop carrier applications, partially offset by the decline in international broadband access revenues due to sporadic timing of orders from a Tier 1 international carrier for 1100 Series fiber-to-the-node products. Optical access revenues increased 30% to $11.2 million for the first quarter of 2008 compared to $8.6 million in Q1 2007 and increased sequentially from $10.8 million in Q4 2007. Comparing Q1 2008 to Q1 2007 the increase of optical access revenues was the result of market share gains across numerous customers, including Tier 1 carriers. Comparing Q1 2008 to Q4 2007, the increase in optical access revenues was primarily attributable to record-breaking levels at Tier 1 carriers, partially offset by seasonality at Tier 2 and Tier 3 customers. Internetworking product revenues increased 34% to a record $14.9 million in the first quarter of 2008 compared to $11.1 million in Q1 2007 and increased sequentially from the fourth quarter of 2007. Internetworking products continue to experience increasing momentum as a result of continuing efforts to improve traditional enterprise channel…

Thanks, Jim. Okay, LaTonya, at this point we’re ready to open it up to some questions.

Thank you, Mr. Stanton. (Operator Instructions) Your first question comes from the line of Paul Silverstein with Credit Suisse.

Tom, can you hear me?

Yes, I can hear you, Paul.

Good, thanks. Tom, can you give us a little more insight on—it sure seems like your next generation products through your growth drivers is finally starting to get some real traction. Can you give us some more incremental insights from what you’re seeing, what you would anticipate over the balance of the year from the time you see in point, with the 5000 in particular, in the optical access platforms?

Sure. Well, the 5000 actually had a pretty good first quarter. We, at this point in time, are shipping to one Tier 1 carrier with the 5000, multiple Tier 2s and multiple Tier 3s. And let me just kind of hit those by segments. In the Tier 1, we’re expecting to ship to all three of the Tier 1s by the end of this year. One of those Tier 1s is farther along in their, let’s say OS integration and field trial activity and we would expect that to come, at this point in time, around the half. But I’ll just kind of remind you that, you know, carriers tend to move dates around like that. The other Tier 1 is progressing with multiple applications in the first set of those applications, you know, we’re expecting—let me just say, sometime in the second half. And then with . . .

Tom, can I interrupt you for one second? I’m sorry. The second Tier 1, you said you said you expect shipments to begin around the midpoint of the year?

Correct; that’s right.

And that was for one application or multiples?

That one is for one application.

And would you characterize that as a prominent deployment?

As a what type of deployment?

As a large deployment?

It has the potential to be a large deployment. That deployment—that application is actually ATM-to-Ethernet aggregation. And the other Tier 1 will be shipping towards the tail end of the year. Multiple applications are targeted for that customer that we’ve been awarded through the RFP processes. Tier 2s, I would say that we would just continue to add on to the few that we’ve got. I think we’re shipping to probably all the Tier 2s at this point in time, in some configuration, very early in the rollout in these configurations. And in most cases we have other configurations; they may be buying us today for a broadband BLC. Most of them are looking at us either for IPB slam, fiber-to-the-node, or for ATM-to-Ethernet aggregation. So I would just say you would continue to kind of add to that momentum through the year. And in Tier 3s we’re already [inaudible] Let me cover optical access real quickly. Optical access, we are at this point in time standardized in two of the three RBOX. And I would just characterize those as just kind of building steam, I think. We’re out there in the field right now, actively selling. And I think we’ve seen a good momentum over the last, let’s say six months or so, and I would expect that to continue on. I would still say we’re very early. With that last carrier we are—with that last Tier 1—we have partial approval, but not into their whole telecom network. So two of the three we’ve got complete approvals, one of the three we’re still working on.

Are you generating revenue from all three?

We are generating revenue, and in fact, I mentioned it—you may have missed it—I mentioned that all three of those actually generated new records for themselves, in the first quarter, which is not typical.

So, Tom, just going back to the 5000: on the third Tier 1 [inaudible] multiple applications where you expect revenue to get around the end of the year, does that have the potential to be larger than the second one, or around the same level?

I would say, at this point, it has potential to be larger than the second one.

And larger than the first, or . . . ?

Probably near term yes, just because the first one that we’re actively selling, which is Ethernet over copper is one that’s there’s initial deployment and then it’s kind of market-based revenue growth. So as they sell more services, we will sell more. But the third carrier is one where’s there’s some existing need right now; we’re replacing some incumbent equipment that will already have immediate demand. So I think in the near-term we will see more out of that third carrier.

And, Tom, you don’t think that there’s any cannibalization, or much cannibalization, of the traditional access products at this point?

Not at this point. I mean, the one where we would see the most would be—that people talk about the most—I would guess would be HDSL. And we’re kind of in a good position to be able to see that incremental creep because that would be probably the biggest technical potential to impact, that would peak would be the copper. And I would say we’re not seeing the peak impact on that yet.

And finally, can you give us a rough idea of just how much revenue you’re generating off 5000 at this point?

That’s getting awful granular. I think people have mentioned before that 5% level. I would tell you we’re at that 5% level.

Okay. Thanks a lot guys.

Your next question comes from the line of Vivek Arya with Merrill Lynch Vivek Arya – Merrill Lynch: Thank you. You sort of hedge your second quarter outlook. When I look at the last two years you have grown 12%-15% sequentially. Can you please share some points on how you expect the second quarter to shape up? And what I’m really interested in is that is your hedging based on just a normal lumpiness in your business, or are you seeing any other push-out or capex or anything that gives you extra concern this year?

Well, our intent was not to hedge it. What we’re trying to do is, being as we have large projects that can actually swing the revenue, and we’re booking shipped business—you know, our visibility just isn’t that great. You know, right now we exited the last year and we exited this quarter with some pretty strong momentum. But there are timing issues associated with projects that kind of keep us from being able to tell you exactly where we’re going to end up. So, to the extent you felt hedging, it wasn’t because we’re not enthusiastic about what we see in front of us; it’s just trying to nail that down in three month increments has been difficult for us. Vivek Arya – Merrill Lynch: Are you seeing any concerns due to the macro weakness? I understand that . . .

Yeah, yeah, you see, [inaudible], if you break away those projects and say, “Okay, what about the underlying pieces of the business . . .”, HDSL I would characterize as a pretty strong quarter, definitely for the first quarter. But I just kind of remind you, we had a little bit of a weaker—in fact we definitely had a weaker fourth quarter than we historically have seen. I would also say that our traditional enterprise business—kind of the non-net [inaudible] piece—was definitely not as strong as we would hope. And I’m not going to sit here and tell you that that is going to rebound because I do think a large part of that has to do with just the overall economy at this point. Now the good thing, and the bad thing, is that at this point in time that represents something less than 10% of our revenue. But it’s still an area that we would look at with some concern. Vivek Arya – Merrill Lynch: And you look at gross margins, there was a slight hit because of, I think you mentioned start up costs in your new products. Now, you will have a number of new product launches throughout this year, so should we look at that pressure on gross margins to stay this year? I mean, will gross margins be in the 58%-59% or do you think they can actually go back to the 59%+ levels that you have seen in the last one or two years?

Where our target has been is to shoot in the high 50s and kind of model the business around the high 50s and give ourselves a little bit of latitude on a quarter-by-quarter basis. You’re right that there are multiple projects that we are delivering now, and we will be delivering for some period of time in the future. And over the last two or three quarters we’ve been in that 58%-59% range. I can’t tell you specifically will we pick up a point next quarter or not because it depends on timing on certain things, and to some extent on product mix. So our stated goal has been high 50s and we kind of like to leave it at that. Vivek Arya – Merrill Lynch: I see. And just the last question is I believe that you mentioned that you will get back to your historical operating model in Q2. Can you please just elaborate on that, in terms of what it means for gross margins and operating margins?

Well, [inaudible], what I actually said, I believe, was that we expect to be at the normal operating model at the second quarter, what revenue level that we achieve--okay? So I think you can relate that to where we’ve been historically, from an operating model standpoint. Vivek Arya – Merrill Lynch: So just a quick follow up. I think though historically your big margins have been, I believe, at 25%+. Is it reasonable to see you get there this year? And if not, what’s to stand in the way other than just product mix?

Oh, this year, as we progress through the year, on a sequential basis, we do anticipate revenue to increase sequentially, with a possible exception of Q4, where we typically see seasonality—okay? We do not expect opex to increase at the same levels as revenues do, going through the year. So with that in mind, we do expect, for the year, to be at the model. And again, obviously, as we progress through the quarters remaining, as revenues increase we should see higher operating margins as a result of higher revenues. Vivek Arya – Merrill Lynch: Right. Thank you.

Your next question comes from the line of Bryan Coyne of FBR Capital Markets.

Hi, guys; good morning. You recently announced your G POM product about the same time that Tellabs announced Exodus. I was hoping maybe you could talk a little more specifically about what you’re seeing and your opportunity there, to help us do a little compare and contrast.

Sure. I can assure you we didn’t coordinate press releases. We have been in the works for a G POM product for some time. And actually in that press release we not only announced the product but we announced a customer with that product. Which was a Tier 3 customer. The timing on our press releases—we typically don’t do a lot of press releases; we just shy away from that and really felt that they didn’t help us a whole lot and can let out competitive information that really doesn’t help us over the long term. When we do do customer announcements it’s typically because we have other customers looking for us to make those announcements in order to help them make decisions they’re making. And that’s really what’s behind most of the announcements that you see from us.

Okay, and I guess it’s just in terms of the opportunity that with the announcement you would expect some additional follow on business beyond the initial Tier 3 customer that you mentioned on the press release, sort of in the interim?

We fully expect to grow that business throughout this year and I would say you would see us follow the same model that we have typically, where, you know, we get into some Tier 3s and Tier2s initially and then try to move ourselves into the right position and a Tier 1 opportunity will come.

Great. Okay. You know, on getting back to the Total Access 5000, and clearly last quarter you had a big shipment to a Tier 1 in Latin America; does this continue to be sort of your best opportunity, from a product standpoint, to increase your international exposure? And maybe if you could just spend a moment talking about your own efforts and partnerships to expand your product reach overseas?

Sure. Now, the Latin American opportunity, or the Latin American customer, the fourth quarter was actually where our 1100 Series [inaudible]

Excuse me; right.

And that is—we fully expect a good quarter, a strong quarter, with—excuse me, a strong year—with that customer. And that customer’s ordering habits have tended to be—and I think we alluded to this in the fourth quarter—somewhat sporadic in that they buy a significant amount of equipment, they install that equipment, which takes some period of time, and then they come back and do it again. And so far that has proven to be true and we expect that to continue on this year. We have other areas in South America where we are actually selling some 1100 products, some good potential. I would say where our international expansion will come from, it will probably come from both the 1100 Series products, where we’ve already seen some good results, and from the 5000 Series products where we are in trials or at the tail end of some fairly good RFP potentials, in different parts of the world. So I think both of those will have the potential to move. In most cases we are going out direct sales or through local country representation. There are a couple of cases where we have teamed with some other companies, but I would say the majority from the revenue is coming more on a direct basis.

All right; it sounds good. One other quick one, I guess, on gross margins. You spoke a little bit earlier about whether or not you might be able to pick up a point of margin, if timing comes through on big deals. What do you think is sort of your comfort range on the 58%-59% outlook? I mean, if you get, you know, all sorts of things falling in place, could that be more than a percentage point of margin in the upcoming quarter or so?

That’s getting awful granular. I mean, it has, over the last two years, sometimes floated up in the very high 59s; there’s nothing that’s endemic to the way that our pricing is going or anything that would keep that from happening again. But we just really need to keep that latitude and it’s very—I would say at this point in time it’s impossible to forecast without knowing the product mix that we end up at the quarter with. So the answer to your question is, yes, we could get back up there again, but we would rather, as people look at how ADTRAN’s model flows in, to listen to the high 50s. We will absolutely fluctuate from quarter to quarter.

Got it. And then one last one. Just in terms—I may have missed it—but top customers. Anything that surprised you?

This is Jim Matthews. Brian, the top customers—AT&T came in with 26% for the quarter, Verizon came in at 11%, Embark came in at 12%, and Quest came in at a record 19% of revenue.

Great. That’s all I had. Thank you so much.

Your next question comes from the line of Ken Muth with Robert Baird.

Hi, guys. Back on the business segment where you talked about kind of the traditional business networking slowing down. How do you look at that through the year, in the way of the net [inaudible] line? Are you going to be able to kind of offset with stronger, better buyer relationships with Verizon and AT&T? Because there is quite a bit of healthy growth in the kind of the estimates at this point within the segment.

Sure.

And just want to kind of see your comfort level there. Can these new relationships, new buyers, and obviously they’re pretty large and substantial, but the concern would be a net enterprise segment maybe slow things down a little bit.

You know, we were able to set a new record on that at the end of the first quarter which was typically the tougher quarter for us to set any type of record. So, we’re not unhappy with the NetVanta performance in Q1. And I don’t get the sense that that’s slowing down. I mean, I think that we still have more potential in the Tier 1s where we’ve secured some business and secured some awards and approvals, that we would fully expect to accelerate through the rest of this year. And our VAR channel recruitment has not slowed down. We’ve picked up quite a few VARs in the first quarter and are continuing a very aggressive program on VAR recruitment through the rest of this year. So, I have no reason to think that NetVanta will slow down. Now, could NetVanta be higher if the enterprise business was robust? Maybe, but our game right now is to actually go out there and pick up market share and there’s a lot of market share for us to pick up.

Okay. And as you talked about in your kind of opening remarks, the international market clearly was down seasonality in Q1 here; how do you see more potential opportunities with all these new products you have out there in your portfolio broadening, what is the international market look like for you in kind of 2008?

The international market has an awful lot of potential for us and a lot of that is in 2008. We have secured some awards that are meaningful and not just meaningful to just the international segment, but to the company. I think our cautiousness there is just going to be more a time where we have secured business. We know there’s business out there and try and get through the buying cycles of a customer may be a difficult forecast, but we fully expect that segment to grow on a substantial basis this year. Some of the RFPs we are involved in right now have the potential of shipping towards the tail end of the year, although I would say those are probably more 2009 events. So, we’re expecting it to grow and we’re seeing good momentum in the products that we’ve introduced.

Now these obviously become more Tier 1 opportunities and more fiber-to-the-node, or better build outs?

Yeah, we have several Tier 1s and they are fiber-to-the-node, some of them, and other ones, there’s a big focus on Ethernet over copper or Ethernet over TDM as they’re trying to move Ethernet out to business customers. It’s very similar to the same type of activity that we’re seeing in North America with the exception of the broadband DLC. We haven’t seen a whole lot of broadband DLC excitement in our international markets. But, other than that, the things that we’re selling in North America seem to be able to be sold internationally, also.

And then what do you see in kind of traditional, kind of D-Slam products right now? Are those kind of being upgraded or substituted, if you will, with your 1100 Series and the TA 5000 and so that kind of revenue segment would be slowing down, kind of continuously?

Yes. The area that I wouldn’t expect strong growth in would be the—specifically the Total Access 3000 piece of our business, which is central office, ADSL, D-Slam, ATM deployment. That was not a growth driver in the last year; I don’t expect it to be a growth driver this year. I think the growth is going to be coming from our 1100 Series and our 5000 products.

Thank you very much.

Your next question comes from the line of Steven O’Brien with J P Morgan.

Hi, thanks for taking my question. Tom, I was wondering if you could comment on linearity of HDSL in the quarter. You know, month to month was there any notable change in demand and how do you look at Q2 guidance, coming out of Q1, overall, with respect to the HDSL business? Should we expect a normal kind of seasonal improvement there?

Let me talk on linearity in the first quarter and then I’ll get Jim to give some specifics we have on HDSL. Linearity in the first quarter is typically very much where orders start off slow in January, pick up some in February, and then really kind of accelerate towards the tail end of February, through March. And I think in general that’s exactly what we saw this quarter. As far as the HDSL having a stronger quarter in the second quarter—and first of all, we fully expect that—Jim do you want to add anything?

Yes, Steven, I think if you go back a few years you’ll see that we’ve seen HDSL increase sequentially in the second quarter. And I think we will continue to expect that.

Is there really an enterprise economic impact on the HDSL business, or should we think of it more related to carriers. But I’m thinking the end customer here is largely enterprise.

Well, there are kind of two major segments and then one that I’ll speak about a little bit. One is—you’re right; enterprise is the biggest piece. Wireless backhaul is a significant piece of that business and then there’s the interconnectivity of the carrier’s network itself. So, as they need to add more bandwidth to D-Slams, for example, they will deploy more T1s in order to feed those D-Slams, if they’re copper-fed—and there are still an awful lot of copper-fed D-Slams out there. So there are kind of purchasers or there are markets for HDSL that may not be so economic, you know, environment focused. And we can’t tell you whether or not it was those pieces that actually drive it to the revenue levels in the first quarter or not. If you look at the overall noise out there in the industry I would say that it probably was not enterprise spending that drove that, and if you reflect that back to our enterprise business I would say that kind of gives you more conviction that it wasn’t enterprise spending that drove that number up.

And if I could, one more. Regarding Quest and the strength from that customer this quarter, could you comment at all about which products were particularly strong there? You know, Quest has been a little slower than the other two Tier 1s regarding fiber-to-the node, fiber-to-the-x build out. Should we be looking at other categories beyond broadband, I guess, to explain that strength?

There are two areas of growth for us in Quest. I mean, Quest is an HDSL customer, also. But the two areas of growth on the carrier side are broadband access, which is predominately our 1100 Series product, and optical access, which they did also achieve a new level of revenue that they had not achieved before. So I think those are the two areas where we’re seeing strength. On the enterprise side, though, they are also, they’ve embraced a lot of our NetVanta products and are doing it there, also.

And actually one more for Jim. Can you refresh us in terms of your buy-back authorization strategy. I guess, I—you decreased the amount of shares you repurchased this quarter—quarter on a quarter basis—but the authorization increased, so how should we be looking at buy-backs for the remainder of the year and is there anything to read into quarter-over-quarter changes in the amount of shares you repurchased?

Well, I don’t think there’s anything to read into it. We will continue to be opportunistic in terms of our buy back. If we look back at the last five quarters, we’ve repurchased a significant number of shares. I think it’s to the tune of about 6.5 million shares, so we’ve made sizeable repurchases over recent quarters and we believe that that continues to be the best use of our excess cash. So we will continue, on an opportunistic basis, to participate in a buy-back activity.

Thanks a lot.

Our next question comes from the line of Jack Murphy

Hi, thanks for taking my question. I just wanted—not to be too granular--[inaudible] 5000 and basically if the first Tier 1 customer for the TA 5000 is down quarter-to-quarter in Q2. Would if be because of absorbing one to capacity or would it be kind of because of waiting of more success-based sales out there with the product? Thanks.

That is getting pretty granular. I mean in the sense that it’s hypothetical as to whether or not we’ll be down. I can’t tell you today that they’ll be down. If they were down, I mean, it would have to do with the rollout of the service and it would be opportunistic to have the market share gains that you’re talking about.

Okay. Thank you.

Your next question comes from the line of George Notter with Jefferies. George Notter - Jefferies & Company Inc: Hi. I just wanted to ask about, you know, you had a big jump in business with AT&T, sequentially. That looks like that actually kind of bounced back to maybe run rates that were more in line with historical norms at AT&T. Am I just looking at kind of the bounce back from Q4 with them, so it started with the slow down in capital spending there and we’re just rebounding here in Q1? Is that the big driver there?

I think there are two drivers. One is they were slow at the tail end, definitely in the fourth quarter of last year. So there probably was some bounce back. Probably more specifically in HDSL than in other areas. And then we did have incremental increases in revenue in both the 5000 and in the optical access business. George Notter - Jefferies & Company Inc: Got it. Okay. And then, just shifting gears a little bit, if you look at the HDSL business and you look in the crystal ball a little bit, Tom, and think about how, over time, you see that business evolving; can you kind of give us your road map for that? Is it something that slows down, you know, a year out, two years out, three years out and you do your best to substitute it with Ethernet over copper and fiber-based solutions? How do you think the net of that would work for ADTRAN over time?

I think over time that business will decline. Whether or not it’s going to decline this year or next year or three years from now, we don’t have a crystal ball that’s that granular, so what we’re doing is trying to add new products and new growth areas just as quickly as we can. And we would do that, by the way, even if HDSL was growing. We don’t expect HDSL to grow this year. I think there is the potential for growth if we see an acceleration in any of those three market dynamics, but mainly the two, being enterprise, which we don’t expect, or wireless [inaudible], which we don’t know. Those are the things in the near term would be the driver. Just whether or not it declines three years from now, I don’t know. I would not be surprised if it did decline. You know, at some point in time, in that kind of time frame. And when they do decline, you know, there’s typically an awful lot of discussion about that as a [inaudible]. But we haven’t seen a mass move away from [inaudible] technology at this point in time. George Notter - Jefferies & Company Inc: Okay. Thanks very much.

Your next question comes from the line of Andy Schopick with Nutmeg Securities.

Thank you and good morning. Guys, I would really like to ask you a bigger picture question, and some of these issues have already been touched upon, but let me rephrase this. In terms of financial management of the business and the relative conservatism of your accounting for financial reporting purposes, I am one of your biggest fans. However, I would like to ask about the ongoing strategy of the aggressive buy-back program. We’re really now approaching close to $350 million of share buy-backs over recent years. While I have no doubt that management believes its stock is a good investment, the top line annual growth over the past five years has barely averaged 7% per annum. I really believe that investors would rather see the company engage in a more aggressive investment, or reinvestment, in its business for accelerated growth, which certainly could have included some acquisitions. Could you kind of talk to us a little bit about what you think needs to be done to better position the company for growth going forward and whether or not these types of aggressive buy-backs, to the extent to which you’ve already engaged in them, really make good sense?

Well, you know, our opinion is—and the board’s opinion has been--that they have made better sense than the alternatives presented at the time. And could we go and do what some other companies have done and make large acquisitions in order to further enhance our growth potential? First of all, we do think we have good growth potential; we think we’re starting to see the fruit of that. But having said that, we absolutely remain open to looking at alternatives to our share buy-back as uses of cash. So, we do actively look at the marketplace and see what companies are out there and see what the potential is for those companies, if they were combined with ours, wanting to add share holder value, and just at this point in time we haven’t seen it. Now, you know, the valuation on a lot of these companies has suffered, as has ours. And in the potential—as I said, the number of companies out there that economically might make sense has grown, but at this point in time we still haven’t seen that. So, we stay open to that; there is no ban against us doing something like that. And we are as active today—and probably more active today—in trying to scour the markets and trying to understand how we can add fuel to the momentum that we have by looking at different technologies, different companies. Nothing has passed that bar yet.

I’m sure you can appreciate and understand the point I’m trying to drive home on this, but one follow up question is on the auction-rate securities area. It appears that you have kind of avoided any exposures to this; am I correct that you really have no cash that could be tied up or subject to any of those problems?

Andy, this is Jim Matthews. You are correct. We do not have any auction-rate security investments at this point.

Wonderful. A+. Thanks.

Your next question comes from the line of Cobb Sadler, Deutsche Bank.

Thanks a lot. I have a question on the TA 5000 and Ethernet over copper. Do you think that application could become the kind of primary, or the dominant, application for the TA 5000? I guess, what RFPs, particularly in Europe, where you haven’t done much business historically, how are the competitive landscape—I mean, who is showing up? Is it Hatteras, Alcatel-Lucent? And can you talk about, roughly, how many deals you are pursing with Tier 2 and above in Europe and what do you think the ultimate win rate could be? Thanks a lot.

I don’t want to give you a specific number in Europe, but there’s more than one. And they are Tier 2 and above. The competitors, you basically named them. Alcatel-Lucent, Hatteras, some start ups like [inaudible]. Some of those have teamed up with larger companies in order to try to present their applications. Right now in the Ethernet over copper space, we believe we have a good head start from a technology perspective and from a price perspective and pretty much any way you measure it. And we think that that’s going to bode well for us in being able to secure some of these opportunities. As to whether or not Ethernet over copper ends up being the largest potential or the largest revenue producer in the 5000 family, I don’t know the answer to that. I think a lot of that has to do with our success rate in all the different areas and, you know, end up winning 20% in one space and 80% in another, and that would drive that. I will say that Ethernet over copper, though, is an area where a lot of the Tier 2 and above have had a significant emerging focus. Some of these people like AT&T have stepped out there kind of early. We’re seeing some of the other European carriers--and mainly in Europe—step out there and really do some things. And I think some of the other carriers are taking notice of that.

So if you’re able to get the TA 5000, let’s say, into three or four European carriers, do you think you could sell additional products into these carriers? Because at the end of the day you’ve been basically locked out of some of these carriers historically.

There’s no reason to believe we can’t. And once we get it approved in their OSs and with the 5000s multiple application kind of flexibility, there’s no reason to think we can’t. And you can imagine that’s exactly what we’ve been trying to do.

Okay. And last question. I know you don’t pay a lot of attention to Street estimates, but the Street’s got about 7% growth for you in 2008 and you talked about, roughly, almost half of your business being growth products and some pretty high growth rates on those products. How should we be looking at the long-term growth of your business, with half your business being relatively high growth product? Thanks a lot.

Cobb, I’ll take a shot at that. We’re in what we believe to be three significant markets where we’re basically at the beginning of gaining significant market share. We have a long way to go in that direction. We believe that as these three categories together exceeds 50% of total revenues and go beyond that, that our growth should accelerate. You know, we haven’t given guidance in that regard but we certainly believe that over time that our business will be in excess of the 7% or 8% that’s on the Street for this year.

Great. Thanks a lot.

Your next question comes from the line of Jason Ader of Thomas Weisel. Jason Ader – Thomas Weisel Partners: Thank you. So, Tom and Jim, if I were to think about the carrier spending environment right now, would you say that you were seeing any impact—clearly not in the Tier 1s, but in the Tier 2s and 3s—are you seeing any impact from the macro environment on Tier 2 and 3 spending trends?

I can’t say specifically the macro environment. I would say because some of these Tier 2s have been more in a lock-down mode for some period of time. And I would say the environment in those accounts really, to me, hasn’t changed. At least over the last nine months or so, I think that they have been very frugal with the way that they are spending capital, and I haven’t seen that change. The only thing that has changed for us, which makes us believe we’re going to actually have growth out of these accounts, actually in 2008, is that we are now approved in areas where we were not approved before. So we’re getting a bigger piece of the pie that they’re spending even though the overall pie may still be somewhat constrained. Jason Ader – Thomas Weisel Partners: Okay, so you may be able to do better than the average supplier because you have some products [inaudible] essentially?

That’s exactly right. We’ve got brand new products that were just introduced and we’re now driving market share in areas that we didn’t have before. Jason Ader – Thomas Weisel Partners: Okay. All right. Thanks. And then, the international business for Q2--and you talked about feeling good about it for the year—do you expect to see a rebound in Q2 off a fairly low level in Q1?

I would say we would see sequentially up, is what we would expect. As to how much it’s up, it’s dependent upon some of these timing issues, which I don’t know. But we would expect to see up. Jason Ader – Thomas Weisel Partners: Okay, but you don’t have visibility on the one large customer that you had in Q4? Making a significant purchase this quarter?

We don’t have visibility that we’re willing at this point in time to say is definitely going to happen. Jason Ader – Thomas Weisel Partners: Okay. And then lastly, Jim, did you talk about tax rate guidance for Q2?

Jason, I think it’s probably going to be something consistent or in the area of what we recorded in Q1, in terms of the tax rate. Jason Ader – Thomas Weisel Partners: Okay, so basically until we get the R&D tax credit approved, we’re going to be at this sort of 36.5% rate?

I think that’s fair. Jason Ader – Thomas Weisel Partners: Okay. All right, thank you guys.

Your next question comes from the line of Nikos Theodosopoulus, UBS.

Thank you. I had a couple of questions on the access business. Just to make sure I heard it properly, when you made the comments on the 5000, you were talking about 5% of total sales, not the broadband access division—correct?

Yes, that’s total sales.

So, if you look at your D-Slam business today—you know historically it started as a central office based business and over the last few years it’s migrated to odd type plans—what would you say a rough split of that business is today? You know, outside plan versus central office?

I would say right now—and I don’t have the exact split—but I would say the majority, over the last few quarters, has been our fiber-to-the-node products, which are the 1100 products.

Okay. And I guess if you look at Tellabs’ commentary—well, their decision to exit the G-POM market, one has to question their investment and viability in the access market overall. And it seems like you’ve been gaining share in the outside plan [inaudible] obviously in the 5000. What’s the competitive landscape there and is it really an area that is right for significant share gain, given they were probably one of the top US suppliers post Alcatel? And it seems like they’re de-emphasizing the market. Is that part of the reason of your confidence in this business for this year?

Yeah, I think it’s been open to share gains for quite some time. I don’t know if the Tellabs announcement really affects that because in the—it depends on the customer base you’re talking about. I mean, outside of D-POM and Verizon, I would say that your biggest strength in North America was in Tier 2 and Tier 3 accounts. And I think that that market potential has been open to several players for some period of time. Now, I have not read them into thinking that they were getting completely out of the POM market. I kind of more view that as a Verizon phenomena, not an overall market. So I can’t tell you that they won’t be more aggressive than they’ve been in the past, but we’re confident that they players and the way that they’re situated today, that we can pick up market share and so far we’ve been pretty successful picking up market share in those bases. I don’t know if it’s wide open; I mean, you can always have start ups and other companies that are trying to do their best to unseat you or get you off track, but at this point in time we’re feeling pretty good about it.

Okay. I’m sorry, let me ask the question a different way. In the last three months, and going forward, who do you think your top two competitors will be in the 1100 and the 5000 product line, as you try to win new business?

It depends on the tier of the account and the Tier 1 is without a doubt Alcatel-Lucent. With Erikson coming in periodically, trying to win some share. In the Tier 2 accounts and in the Tier 3 accounts I would say it’s more people like Calex and some of these smaller companies, with Telus periodically having a strong position. But, as I say, it’s a broad list of players in the Tier 2s and Tier 3s.

Okay. And my last question is, in the next two quarters, if the TA 5000 becomes a greater percentage of your business—which it sounds like it will, based on the admission of two Tier 1s over the course of the year—do you think that we’ve seen the bottom of gross margin for the company? Assuming there’s no massive capex slow down, and your revenue stream overall gets impacted. But as this mix becomes bigger and you grow your overall sales sequentially the next couple of quarters, have we seen the biggest impact in gross margin or is it possible that gross margin slowed down sequentially as the TA 5000 ramps in Q2 and Q3?

I think you’re attributing the gross margin impact to be specifically 5000-based. That’s not always true. I mean, if we go and win a large Tier 1 for 1100 Series products you may see some impact of that win as we initially roll that product out. The 5000—if the 5000-let me try to answer it this way: if the 5000 were out there and deployed today and we didn’t have these kind of start-up impacts, would gross margins suffer from where they are today, or way the 58%-59% range? The answer would be no. I mean, the gross margins on the 5000 product itself are very healthy. I don’t know if that answers your question or not.

Okay, I think it does. But just to clarify. So these start-up costs are total-value based, not customer-specific based? I guess where I was coming from is if in the next couple of quarters you get big Chassis orders with not a lot of line card and two new customers, you’re going to still have these start-up costs and they could impact gross margin. That’s what I was trying to get at. Or is it more a volume situation and as the business ramps the start-up costs go away as you spread it across multiple Tier 1s?

I’ll give you an example which may help you understand this a little bit better. In some times, historically, what we have done is we have gone in there and incentivized broad footprint deployments in order to secure that footprint for ADTRAN’s market share going forward. Now, those deployments are typically—or those types of incentives—are typically one-time things where it’s for “x” number of pieces of equipment in this footprint and once we hit that spot, they go away. So going forward, as they expand capacity, even if it’s Chassis or expand footprint, even if its Chassis, you won’t see that hit in margin.

Okay. But it sounds like, barring something unusual, you don’t see the gross margin going down as the TA 5000 ramps for the next couple of quarters?

The 5000 itself will not cause that decline in margin. What we want to make sure we have the flexibility to do, though, because we can go out and grab large chunks of market share and we work out an arrangement with customers, that may impact the gross margin over the short term. We want to maintain that flexibility and we think we can do those type of deals within the high 50s guidance. And we just want to maintain that.

Okay. All right. Great. Thanks a lot.

I would like to thank everybody for joining us on our conference call and we look forward to talking to you next quarter.