Good morning, my name is Bonnie and I will be your conference operator today. At this time, I would like to welcome everyone to the ADTRAN second quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator Instructions). 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 product and channel mix, component cost, manufacturing efficiencies and other risks detailed in our Annual Report on Form 10-K for the year ended December 31, 2009; and Form 10-Q for the quarter ended March 31, 2010. These risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements which may be made during the call. Thank you. Mr. Stanton, you may begin your conference.

Thank you, Bonnie. Welcome to ADTRAN second quarter 2010 conference call. Joining me on the call is Senior Vice President and Chief Financial Officer, Jim Matthews. I’d like to begin by providing some insight into the company’s performance for the quarter and comment on our outlook for the third quarter. Jim will then provide the financial results for the second quarter. We will then open the floor to answer questions. As stated in our press release, ADTRAN had record revenues of $150.4 million for the quarter, driven by accelerating demand for higher speed services from residential and business customers in both fixed and wireless applications. As you can see from our disclosure, both Carrier and Enterprise Divisions benefited from these trends. The Carrier Networks Division reported a strong 28% increase in revenue over the same period last year due to a number of factors including increased deployments of infrastructure for higher speed broadband connectivity, increasing demand for wireless backhaul as carriers continue to deploy infrastructure to alleviate network congestion, increased deployments for business Ethernet connectivity driven by network convergence, the need for higher speeds and the growing demand for native Ethernet services, and increased need for network aggregation as carriers strengthen their infrastructure investment in a cost effective and scalable manner, and a generally improved telecom spending environment. Likewise, our Enterprise Division benefited from another strong performance in its internetworking category which grew 37% over the same period last year. This category’s performance was driven by continued growth in our expanding dealer base, market share gains and market growth from competitive carriers and market share gains at Tier 1 and Tier 2 carriers. During the quarter, our combined growth areas broadband access, internetworking and optical access delivered yet again growing an impressive 36% year-over-year. For the first half of 2010,…

Thank you Tom and good morning to everyone. Revenue for the second quarter increased 24% to a record level of $150.4 million compared to a $121.5 million in Q2 of 2009. Broadband access part of revenues for Q2 of 2010 increased 43% for a record level of $45 million compared to $31.4 million for Q2 of 2009. Internetworking product revenues for Q2 of 2010 increased 37% to a record level of $27.9 million compared to $20.4 million for Q2 of 2009. Optical access product revenues for Q2 of 2010 increased 19% to $16.1 million compared to $13.5 million for Q2 of 2009. Carrier systems revenue for Q2 of 2010 increased 30% to a record level of $73.1 million compared to $56.2 million for the second quarter of 2009. Business networking revenues for the second quarter of 2010, increased 22% to a record level $32.2 million compared to $26.4 million for the second quarter of 2009. Loop access revenues for Q2 of 2010 increased 16% to $45 million compared to $38.9 million for Q2 of 2009. HDSL product revenues increased 23% to $42.2 million for Q2 of 2010 compared to the $34.3 million for Q2 of 2009. As a result of the above, Carrier Networks Division revenues for Q2 of 2010 increased 28% to $117.6 million compared to $91.8 million for the second quarter of 2009. Enterprise networks division revenues for second quarter of 2010 were $32.8 million compared to $29.8 million for the second quarter of 2009. International revenue was $8.3 million for the second quarter of 2010 compared to $6.4 million for the second quarter of 2009. To provide the reporting of each of these categories, we have published in our investor relations web page at adtran.com. Gross margin was 59.4% of revenue for Q2 of 2010 compared to…

Thanks very much Jim. Bonnie, at this time we would like to go ahead and open it up to any questions people may have.

(Operator Instructions) Our first question comes from the line of Todd Koffman with Raymond James.

Thank you very much, congratulations on a good quarter. What contribution in the quarter did you benefit from as it relates to the economic stimulus spending for broadband and how do you see that playing out, again an update on that?

We had some customers that we have won either in the first quarter or the second quarter that of course have since then actually been awarded broadband stimulus funds. But it’s unclear to us as to whether or not those funds were actively used to purchase equipment versus equipment they may have purchased for other reasons. So the net of that is, my sense is if we received some stimulus funds in the second quarter, they were minimal, they really didn’t move the needle much and we would expect them just to kind of ramp up at some rate through the third quarter and beyond although it’s hard, it’s going to be difficult for us to tell you exactly what’s what and we’re not expecting a very quick acceleration in the third quarter and it is not in the numbers that we are talking about in Jim’s view of the third quarter.

Do you still expect looking out over the next four, five, six quarters of that to be a nice incremental uptick [ph] or has the whole program sort of starting to fragment?

I don’t think it’s fragmented, I mean, there are pressures on the program that popup periodically. We don’t think anything has stopped the programming. Yes, the answer is we do expect it to have some contribution as we go forward from this point in time and definitely into 2011. Although, we’ve been reluctant to put an exact timeframe around that or an exact dollar amount around that because of the obvious piece which is that it’s government funded and governments sometimes don’t behave in the way that you would expect them to behave. So that’s the reason for our reluctance. It’s nothing to do with whether or not we think we’re going to be successful in that market or whether or not we think at this point in time the market has real potential. It is just a matter of the fact that there are always unknowns when you’re dealing with government funding like that.

Thank you very much good luck.

Sure, thank you.

Our next question comes from the line of Jim Suva with Citi.

And congratulations everyone. My first question is, when we look at the balance sheet, I think it’s pretty fair to say that inventory increased pretty significantly and I typically think of inventory you would build today for your sales tomorrow and I’m having trouble matching the inventory build with your sales outlook of flat to slightly up, can you kind of help me bridge that?

This is Jim Matthews. So inventory did uptick obviously in the second quarter and it really happened for two reasons, to fund increasing revenues and also to mitigate component supply constraints that we’ve been seeing and that we’ve commented on over the last few conference calls. As we look at inventory say, at year-ends or in the December quarter, we expected our inventory turns will return to a normal turns level which is just about four times. So we do expect the issue to moderate as we go through the year.

And my quick follow-up is, when we look at the tax rate understanding that you’ve got to benefit from prior year resolution of audits and my understanding is the R&D tax credit is kind of stalled out in Congress and the Senate and maybe it comes back, or maybe it doesn’t but lets just, I guess assume it doesn’t. Is it more accurate to build in going forward like a 35% to 36% tax rate or can you talk to us a little bit about tax rate expectations?

Sure Jim, fair question. So as far as our tax rate expectation excluding any benefit from the research credits, we are looking at somewhere in the range of about 35.5% tax rate. And actually if you add back the benefit that we saw in the second quarter you come up to something very close to that rate on a GAAP basis. We are being told that in terms of the research credit that the expectation is that it would be in the fourth quarter and we are hearing this from people that apparently know what’s going on in Washington. And in that event, that benefit would actually happen in the fourth quarter of this year.

Our next question comes from the line of Nikos Theodosopoulos.

Can you give us an update I guess first of all on the 10% customers this quarter?

Sure, Nikos; this is Jim. AT&T came in at 17% of total company revenue, Verizon at 12% and Qwest at 20%.

And I guess the exposure or I guess the spending of AT&T and Verizon doesn’t seem to be as robust as the rest of the businesses. Do you see concern among the bigger carriers in terms of their spending outlook throughout the rest of the year or would you characterize that it’s more of a slow start to the year? What’s your impression of that?

Nikos, I think your question applies more generally, as opposed to specific to ADTRAN, is that correct?

Yes, I guess if I just look at the trend of the Tier 1 customers in general, they don’t seem to be spending as robustly versus your results and just get your perspective on, is there concern on -- I mean, you seem pretty confident for the second half, just want to get your sense of how do you connect those dots if you will?

Well, I think the confidence that we have in the second half is driven by probably as much by the particular product segments that we’re expecting growth from as much as the specific customer that we may or may not be expecting growth from. So in general I think we are happy with the way that our large customers have adopted our product so far this year. We expect positive improvements on a pretty wide scale or pretty wide base of customers going into the second half. And if you look at the pieces that we play in, which in a lot of cases is infrastructure upgrade, it’s wireless bandwidth upgrade, it’s higher speed initiatives where there are competitive pressures that are forcing carriers to do something or it’s cost savings whether doing aggregation instead of for instance putting additional router blades in or expensive switch blades in. I think we feel, I think that’s probably what’s got us at least to the point that we are right now.

And just on international, I mean it’s still a small number but it was a nice sequential uptick, I think it’s the highest quarterly revenue you’ve seen in several quarters. Was there anything unique this quarter there that’s sustainable or can you talk a little about that?

As far as sustainability I would say, yes, we feel confident at the level we are and we feel that, as you know, it takes quite a while and we’ve been at it for quite a while and I would say it’s a fairly broad based increase although it’s albeit small and we think it’s just a matter of us continuing to go at it and get traction in a broader base. So we have a lot of things going on although a lot of them still have a quite a bit of runway before we actually see something. But I think it’s a broader based just of us continuing to push forward with the same product set.

Can you give some color on the TA 5000? I mean you mentioned it several times during the call, what kind of sequential improvement you saw there, just to give us a feel about what kind of momentum the business has.

That would get pretty specific, I would tell you we are very, very pleased and I am sure you want more color than that but we are very pleased with the way the 5000 came in in the quarter. The reason we highlighted, as much I highlighted in my comments and the reason we did that is because we try to, during my comments, actually highlight the items that contributed the most. And so that was the reason for that. So I would say we’re very happy with where we are right now with it and we expect more going into the second half.

Our next question comes from the line of Steve Ferranti of Stevens Inc.

When you look at the second quarter results, Tom, can you give us a sense for where the upside might have come from relative to your original guidance for the second quarter?

Yes, it is a good question. One is, I think we entered the quarter feeling good about broadband and feeling good about the uptick in the 5000. And one of things that happened in the second quarter which you don’t always see which is, which had every single carrier segment grow. And by the way in the Tier 1s and Tier 2s we had every single customer grow from the adoption of the 5000. So I think that’s something that you typically don’t see and I think that was a real positive to us. The other piece of that I think internetworking we expect growth, it’s probably a little bit more than we expected, but we were expecting a solid performance there. And then the piece that we were kind of unsure about is kind of what the HDSL backhaul and the OPTI backhaul and then trying to see to what extent that would play itself out and it came in fairly strong.

Okay, that’s helpful. And then, I know this is obviously a book and ship business but it sounds like from your commentary and maybe your tone that perhaps visibility is maybe a little bit better than what it normally would be historically. Is that accurate and I guess if so, what do you think is behind that?

The type of products that we have have shifted over the years, but I would still say that our visibility isn’t substantially different than what we have seen in the past. So a lot of what we look at when we’re drilling into what we think third quarter will be is absolutely looking at the mirror and trying to get a sense for the recent order flow that we see in any particular area and then trying to extrapolate it from there. So I wouldn’t say it’s a undue increase in visibility.

Okay, fair enough. And then last one for me, I guess for Jim, talked about a little about the component availability issue earlier. Has that improved since you last updated or so on it? Do you see it getting better or are we still pretty tied on the supply chain?

Yes, Steve. We don’t see it getting any worse. I think that’s how we would best characterize it, at this point. We are hopeful that as we approach the latter part of the third quarter and the fourth quarter, you might see some indications of things return to some level of normalcy to the point of our expectations that we expect the inventory turns will increase back to their more normal levels of just over four times.

Our next question comes from the line of Sanjiv Wadhwani of Stifel Nicolaus.

Tom, on HDSL, clearly, the momentum was very strong in 2Q, is it fair to say you were a little bit surprised by that? And can you talk in sort of broad strokes about how decisions are being made particularly by AT&T for example to use HDSL versus OPTI. Any color on that would be helpful.

A couple of things. First I’m really going to be reluctant to talk about any specific customer and in this case, I don’t think it’s really required because what we saw with HDSL was a very broad based increase. It wasn’t any specific customer that actually drove that increase. And is it higher than we thought? Well, if we had to put a number on it which we try to do when we go into a quarter, I would say it’s probably a little higher than the number we put on it. But we did kind of get the sense and I think we try to relay the sense on the last conference call that they were strength there that was not what we initially thought three months prior to that. So a little bit higher, but we knew that there was the possibility of that based off of kind of what the momentum was going into the quarter. It was very broad based and I would say that there are a couple of things that drove it I think; wireless of course always has the biggest potential to drive that number one way or another. I do think that we saw a broader based usage in other areas. For instance, if you look at the internetworking piece, one of things that drives the internetworking piece which I commented on is the competitive carrier base and we saw a fairly strong increase in competitive carrier utilization of IP gateways, which at the end of the day is fed with T1 circuits and predominantly HDSL circuits. So I think you saw business customers actually picking up on T1 lines too which probably helps fuel that.

And then any updates Tom on the Qwest-CenturyLink merger, any plans that might have been communicated to you and in general, can you talk about how CenturyLink did during the quarter?

What we talked about in some of the different comments that all of our Tier 2s were up and I think that’s probably as much as I would want to say about that. As far as what’s going on with the merger, if you ask whether you’ll know as much as we do on exactly how fast it’s progressing, where our stance is, and the way we view it and the way things have been communicated to us, is things are moving forward at kind of a normal process through the end of the year. We feel comfortable where we are, our market position wise actually in both of those accounts, not that we don’t have to continue to earn our ability to sell to them at the levels that we are selling to them and at levels that we hope to grow, but there’s really no new news from our side.

Our next question comes from the line of Amir Rozwadowski of Barclays Capital.

Tom, I was wondering if you could comment a bit more about the strength in the Tier 2 and Tier 3 space. Was that generally broad based or do we see particular strength from carriers such as the Frontier, which as you know you had highlighted as a recent win for you folks for some of their access lines from Verizon.

I would characterize it as generally broad based. We did have a press release with Frontier or that mentioned Frontier in it and my sense is that most of that is yet to come. But I would still say every Tier 2 is up and it was fairly broad based.

And then I was wondering if you could give us an update on the Ericsson partnership in terms of how things are progressing there. I know historically, you had expected those revenues to flow through sort of the first quarter of next year. I wanted to see if that’s sort of on track or how we should think about things there?

I think things are still on track and progressing well albeit that is a fairly complicated project with dealing with two very large companies. But there is nothing right now that tells me anything is any different than what we have felt from a timing perspective over the last six months.

Great. And then, lastly if I may on the operating margin side, if we think about your guidance you know flattish to slightly up sales and sort of OpEx increasing as well. It seems as though you come above sort of that 25% marker on the operating margin side. I mean, do you expect with this type of revenue out performance to increase ongoing investments in R&D and your OpEx or should we just think about that as sort of inline with sort of sales growth?

I would think about it as inline with sort of sales growth. And I think we’ve been actually increasing. If you take a look, there are a couple of things that are going on. Some is we’ve kind of changed the mix of our operating expense lines. We’ve continued to grow R&D and you’ve seen it increase but you’ve seen it increase at a rate that’s kind of more in line with what the revenue growth has been. And as we’ve said before, there were certain quarters where kind of the revenue line will outrun that and that was the case here. But there is no change in the methodology or in my opinion in kind of the ramp of that growth, there is no big stair step function that we are planning.

Our next question comes from the line of Rich Valera from Needham & Company. Rich Valera - Needham & Company: I just wanted to go back to the Qwest-CenturyLink deal; I understand you are comfortable with your competitive position in both accounts. But what do you think about the potential for delays in orders around that the closure of the deal just as there could be I guess with any large transaction?

To us that could happen. We have in our history dealt with several mergers and sometimes that happens, sometimes it doesn’t. To the extent it does we kind of view that as a, kind of a singular event that tends to work itself out on a short order and whether or not it falls in any particular boundaries we don’t know because we don’t know, number one, if that will happen or when. I think that there is an awful lot of, my hope is, I don’t want to say for the customer what’s going on, but my hope is there is an awful lot of communications going on. I think my sense is that both customers are very motivated in upgrading their network and offering these services to their separate and then combined customer bases, so my hope would be that we would see that, but I can’t tell you that wouldn’t happen. Rich Valera - Needham & Company: And just wanted to revisit your revenue guidance for the third quarter, and you referenced the prior three year’s seasonality which looks to have been pretty consistently sort of mid-single digit, sequential increases in the third quarter. Just trying to reconcile that with your flat to slightly up guidance, is there something that would make you think maybe you’d see less than really what’s been the pretty consistent sort of mid-single digit growth in the third quarter?

As we go back, last year, we saw 5%, the prior year we saw 5%, the year before that was flattish or very flat, and that’s how we’re coming up with that sort of guidance. So we don’t see it, particularly out of the norm.

Our next question comes from the line of Erin Riley of Goldman Sachs.

Hi, this is Erin Riley on the house of Simona Jankowski. Just wondering if you can provide some color on your expectations for gross margins next quarter? And second question wondering if you are seeing an acceleration in optical from wireless backhaul and if you can speak to the dynamics, you are seeing of legacy copper and fiber within your backhaul business?

Erin, Jim. I’ll take the gross margin question. Now, we continue to expect the gross margins in the third quarter to be in the range of the high 50s. And in relation to the optical and versus copper backhaul we actually saw positive momentum in both, there was no doubt that our HDSL number was affected by copper backhaul. We continue to believe, I think as most people believe that there are so many cell sites that either economically cannot be moved over to fiber or timing wise can’t be moved over to fiber in a realistic timeframe that HDSL will continue to benefit and copper technology will continue to benefit because of that and I think we absolutely saw that. There was also no doubt that the 6100 or OPTI products or optical products saw a very good increase because of wireless backhaul.

Our next question comes from the line of Ari Bensinger of Standard & Poor’s. Ari Bensinger - Standard & Poor’s: Yes thanks, most of my questions been answered. But just back to the broadband stimulus package, assuming the roughly $7 billion is doled out absent any timeframe talking about a year or two years, what type of share do you expect to be competitive or get from that pie?

Being as I don’t know who is going to win all that, it’ll be very difficult to tell you that. I think there is a potential because of the amount of money that’s going into that for it to be significant. We think we will get a meaningful piece of the market share. I think it’s not so much the meaningful piece of the market share that we’re worried about or that we’re unsure as far as timing, it’s really just the size of what actually flows through. But I’m not going to try to peg a particular market share.

Our next question comes from the line of Ehud Gelblum of Morgan Stanley.

A couple of questions, first of all on HDSL, clearly it’s doing a lot better from wireless backhaul, it’s going to be better this year. Now it’s going to be roughly flat to slightly down. The long-term trends of that though given that it appears that a lot of wireless backhauls is trending more towards Ethernet over time, how do you see HDSL trending the year over the next couple of years? From what you are seeing, are you seeing a lot of sort of last minute just in time buys for HDSL to fill immediate needs for wireless backhaul or do you think this is possibly the beginning of another just more sustainable trend for HDSL that we can see it continue for another couple of years? Just trying to figure out the sustainability of the HDSL businesses as we’re seeing to do much better now over the last couple of quarters.

Yes, that’s a very good question. I mean first of all I would say as far as last minute buys versus non last minute buys, HDSL has always been more last minute buyish. I mean our typical lead time on HDSL and I am going to just kind of guess here, but it's probably less than 10 days from when we receive the order. And they don’t order 10 at a time, they tend to order thousands, at least a thousand or five thousands at a time. So it’s very much – that’s the way that they think about the availability of that product and that’s the way they buy it. So I don’t think we’d be able to draw much from a decrease in visibility in that product area. As far as how we think of going forward, when we came into this quarter, a little of this year feeling that wireless backhaul had actually hurt us last year in the HDSL product line, because of that we thought we were at a kind of a low rate for HDSL from a general usage in wireless and in business. And because of that we had thought that kind of high single digits would be a realistic number even though we had decreased more than that last year. That’s going to turn out not to be the case and the usage is not just in wireless which I do think is going to continue on for some period of time. The usage though as I mentioned is kind of broader based than that, we are actually seeing business customer usage, and in a lot of those cases, it’s business customer usage to deliver Ethernet service. So how that plays in and whether or not for instance competitive carriers will have easy access to native Ethernet copper services I think is yet to be figured out. So we’ll give guidance for next year based on our best information on the fourth quarter call but there is no doubt its going to do better this year than we’ve had, and we’ll try to probably gauge at that point in time what we think the slope of HDSL would be.

That’s actually really interesting. Can you comment on the linearity of that HDSL business, just give a little more hints in terms of there and then as well the mobile backhaul uptick that you saw in both HDSL and OPTI? Given that it doesn’t look as though the Tier 1 guys, you three ten percenters picked up a whole lot sequentially, is it right to assume that a lot of this wireless backhaul activity is more to the Tier 2s and Tier 3s?

I would say it’s very broad based but your Tier 1’s are always going to very significantly outweigh the capabilities of the Tier 2s and the Tier 3s in deploying the product. And as far as linearity, I would say it was fairly linear. I mean it was one of the reasons we have talked about HDSL potentially being stronger at the end of the first quarter was we were kind of seeing that increase in demand in HDSL going back towards the end of the first quarter. And I think it’s been just a very steady strong product since that point in time.

You don’t expect it to necessarily to up sequentially into Q3. It sounds like it’s hit a sort of a run rate-ish type of basis of last couple of months.

I know what that means. Because of the linearity that we see, I mean if you kind of infer the guidance and kind of take apart the products that we said were up, I mean I think HDSL, like I said, has got a short lead time but I would think about it is we’re thinking second quarter was a good quarter and it was a linear quarter and we’re not expecting strong growth from this point in time into the third quarter.

Okay. I would say – I had one other thing that I mentioned before as well. If you do calculate out your 10% customers, there is a little bit of growth but not a lot. Yet HDSL grew quite substantially and so did OPTI. If they…

And 5000 broadband did too by the way.

And 5000 did as well on a sequential basis but that was a little bit more expected than the wireless backhaul boost. What I’m trying to get out is if the Tier 1s grew in HDSL and OPTI just as much as Tier 2s and Tier 3s, then did something fall off because they actually stayed on a revenue basis relatively steady, fell off a little bit, but no way near as much as your total top line?

The 5000 was up in all of the Tier 1s. I mean, I guess I am probably trying to break this apart but I would almost need a spread sheet to do so. I’m not sure.

I can take it offline.

Yes. I’m not sure how to answer that. But there was nothing that in the larger customer base that was a big -- there were no negative surprises there that I’m aware of.

No. I appreciate the analysis of it. Thanks guys.

Thank you. Our next question comes from the line of Simon Leopold of Morgan Keegan.

Thank you very much. I just wanted to see if we could talk a little bit, maybe big picture trending. I understood you had some trouble trying to quantify the contribution from government stimulus. I’m wondering if maybe we could go at kind of the drivers in another way. If you could quantify how much of the business, and really order of magnitude would be sufficient, but how much of the business is coming from backhaul versus the enablement of enterprise services versus consumer broadband, can we kind of get a rough cut of that.

I’ll take that. Simon, at this point, I have difficulty in doing that.

Let me see if I can add one thing. Broadband is -- broadband, residential broadband was the biggest growth piece of those three that you mentioned.

That was the biggest driver. I guess what I’m trying to get a sense of is contribution as a percent of revenue.

I don’t -- I don’t think we have that here because that gets into -- one of the issues that we have is the 5,000 can be used for so many things and what ends up turning it into an Ethernet over copper or Ethernet aggregation or a broadband device ends up being the particular personality cards that are deployed in it. So it’s not something that’s sitting right in front of us right now.

That’s exactly why I asked because it seems like a hard number to get to. Figured you had a better shot than I do.

Really the way that we would -- I will tell you when we try to look at them and try to characterize that, one is, we can’t do that in-depth analysis. We do that periodically just to make sure that when we say we are growing in one area, then we are growing the other areas. The other way you can look at it of course is by customer. I mean not -- there are customers, we have customers that have deployed it for all three of those particular applications but we have some customers that are well predominantly one versus the other. By the way, we forget about broadband DLC, which is I guess you could map into the residential broadband piece. But I would say, I don’t have any doubt residential broadband is the biggest piece, but breaking it apart as to percentages will be difficult.

Well, maybe just cutting it then from a qualitative perspective, how do you see these areas as drivers trending through the next say four quarters?

I’m sorry, because I didn’t write it down. Your three areas were?

So I’m looking at I guess residential broadband, mobile backhaul and enterprise Ethernet.

Enterprise Ethernet will be trending up, we’re fairly confident about that. Broadband without a doubt will be trending up; wireless backhaul has been choppy. If you look over the last couple of years and we’ve talked a lot about that. So I think in general wireless backhaul will be up if you give some time to that, but if you look on any particular quarter, I think it tends to be more choppy.

And is this the choppiness reflective of sort of your view of trends or specific sense of customer need or the last part of that is just maturity of the mobile backhaul upgrade?

Absolutely trends. I mean customers, especially larger customers, tend to focus on one area than another area and when they focus on one area, products that are in that particular products that do well and then they move that kind of focus to another area and then other products do well. So it’s first of all, I think we’re very still, of course, very early in the mobile backhaul upgrade cycle and, so I’m not worried about the longevity of the market at this point, it’s more of a from quarter-to-quarter, they tend to focus on different things.

Thanks. And just one last question please. An update on how you view the competitive landscape. I think you commented in the prepared remarks that you expect to gain share, wasn’t sure if you were highlighting specific applications or your overall business?

There are a few specific applications that I think that we aren’t -- I have no doubt we’ve gained share and we feel very confident about where we are at this point in time. Broadband access is one of those and if you look at the different market segments we compete against different customers in different market segments you are aware of that. And in, I would say, in all the market segments we showed that we are in a good position to gain some share. IP business gateways, routers and switches, I think there is no doubt we gained some share there. As well as we’ve seen especially in IP gateways we’ve gained market share, we know that, we know the customers, we know some of those customers haven’t yet started deploying, but we can also take a look at our kind of same store sales type approach which is customers that we’ve had for a long time, how are those customers doing and there is no doubt that market has grown some over the last year also. So, those are just two areas that I can absolutely say and Ethernet over copper we’re in a very good position there. A lot of these other piece I think we’re well positioned. And by the way, when I said broadband access, of course it’s fiber-to-the-node as well as the 5000 application, things like that.

Our next question comes from the line of Cobb Sadler from Catamount Advisors.

I had a follow-up on the Frontier Verizon Access deal, did that deal, do you guys know that the deal closed July 1, as expected? And then also to what extent have you baked in in the guidance the fast 1-A [ph] initiative for initial deployments into the Verizon properties?

Everything as far as I am aware is going on as planned, so I don’t know of any change. I think everything has happened according to what they have been planning for some period of time. And as far as do we have it baked into our numbers, we look at broadband in general and Frontier has been a customer of ours. There is no doubt that this particular word has the potential to move this forward on a market share basis substantially from where we were in the past. Yes, you would expect us to be able to look at that but we tend to look at it from a customer basis and then overall basis and say that this makes sense even if some things don’t happen and that’s how we came up with the number. But we do expect to have a stronger second half than the first half and here again I’m going to try not to talk about specific customers. I think I probably get a little bit too much there.

I understand. And just a follow-up on Optical Access, Tier 1, I mean this Tier 1 versus Tier 2 split, is there, do you have a rough split there? I guess for the major carriers what percent were they of the optical business, if you can break that out? If you can’t, no problem.

I don’t think we break that out and I don’t think we have. With optical access, it’s very similar to HDSL. I mean, I think, in general when we see an up tick like this, we see a fairly broad base up tick and I would venture to guess that that’s exactly what happened in there.

Our next question comes from Michael Genovese of Soleil Securities.

Two questions, first can you just put some quantitative numbers around the guidance, if you’d do that?, I mean flat obviously is zero percent but when you say slight growth, I mean do you think of the upper bound of that, would you think of 2%, 3%, or what are your thoughts there?

I am afraid what we are trying to do is give color and we are very reluctant to get more specific with that. So flat to slightly up refers to, again if we look back to the last three years, the sequential up ticks, if there were sequential up ticks, were in the range of 5%. And if you look back to 2007, it was actually flat, okay. So you might draw conclusions somewhere between those numbers, okay?

Great, that’s very helpful. Number two, just when we think about your international expansion opportunities, you talked a little bit about Ericsson. But I am wondering the main thrust of your international opportunities, is that organic ADTRAN activity, is that the Ericsson partnership, and are there any other significant international distribution channels that we should be aware of?

The main thrust of our international push at this point is organic. There are opportunities, we have won some business in Asia and nothing that’s gotten to the point to where we made noise about it. We won of course business in Western Europe. We have some business in Latin America that we think still has potential. But all of that stuff is direct with in-country partners and I think that’s the way to think about where our distribution channel is at this point in time going forward. And if something significantly changes, we would talk about it.

Thank you. Our next question comes from the line of Paul Silverstein of Credit Suisse.

First off, with respect to the revenue mix from a customer perspective, your ISU customers, Tier 1, and below, everybody below the RBOCs, you were up 23% year-over-year off of 38% growth last quarter year-over-year. Jim, can you give us some insight and I know you made some commentary about additional wins, deeper penetration. Can you give us some more incremental insight in terms of what’s driving that growth? Is it mostly deeper penetration? You are already in most of those guys, you’ve been in most of those guys, but any insight you can give us on what’s driving the bulk of that growth? And then I have got a couple of other questions.

Let me make sure I got the question right. So if you take a look at the Tier 2, Tier 3 space, what’s driving the growth there, that is what the question is?

Correct, I mean that’s where the bulk of the growth has been over the last couple of quarters. What’s driving it?

The number one thing I would have to say would be the Total Access 5000. I mean that’s a product that if you look past a year, and in many cases even if you look shorter than that, that’s all incremental to us, because we were fairly new into -- although they have been customers for a long time, we were fairly new to getting that approved and definitely some of the bigger ones, as we rolled out the feature set and in all of the smaller ones. So that growth predominantly is from the Total Access 5000.

And Tom, does that go hand in hand with -- if we take a look at your growth from the perspective of how much of this is organic growth in end markets versus taking share from current competitors, is a bulk of that growth in ISUs as well as RBOCs for that matter, is that you are taking share from the existing players?

Let me lay out. It depends on how you say taking share. So let me lay out what I mean by that. So there are customers where we were not. In fact there are quite a few customers and we were not selling the Total Access 5000 a year ago and we are selling it today. And in many cases, during that same period of time, the customer’s appetite for that type of product went up. So there’s been some inherent market share gain but there has been market growth and you could argue whether or not that market growth which I wasn’t going to participate in is actually market share gain or not. But I think the pie has gotten bigger in many of these customers and our slice of pie went from zero to whatever it is. Does that makes sense to you?

Yeah, it does. But Tom, if I could push it one step further, if I go back to Simon’s question, can you give some quantitative or at least qualitative discussion of, you go into an ISU TA 5000, is it a new application more often or not? Is it more bandwidth in a consumer broadband context where instead of using whoever’s platform they were using, Alcatel Lucent, Tellabs, whoever, they are now bringing you in to do an upgrade in the context of delivering more bandwidth to the end user. How much is one versus the other?

Sure. So in that context, first of all, I’m going to step back and just say I think the market, the broadband market right now is a healthy market and I think that a lot of people can participate in a positive way in a healthy market like this. So I wouldn’t discount the fact that the market has grown. But in the specific question you are asking, there is no doubt that in the broadband sense, they could use us or somebody else. And so, from that sense, they are using us where if we had not have come in, somebody else would be getting that business from a broadband sense. There are other applications that are not so clear cut, Ethernet over copper, Ethernet services in general, are thing where you can almost call those brand new markets from a broadband and the way we’re talking about here residential broadband, yes, it is a piece that other companies can do.

All right. I knew this was asked earlier and you don’t want to get into specifics with respect to the 5000 contribution but is it -- can you give us some sense for -- if I look at 5000 plus your fiber-to-the-X business, I guess it’s worth 1100 and 1200, is that almost all of broadband access revenue? Can you give us some quantification of that and then…

That’s almost all.

All right. And then between the 5000 and the fiber-to-the-X, can you give some sense, I trust the 5000 over 10% still?

Yes. That is a -- we don’t expect to see that 10% mark again.

All right. Are they growing at an equal clip, Tom? Can you give us some sense of that?

5000 absolutely grew at a faster clip. And I think that has to do with -- I don’t say we’ll always do that because I think as I mentioned, we have some new products coming out. We also have a lot of interest in the whole fiber-to-the-node architecture and those tend to be larger customers. I will tell you without a doubt in the second quarter 5000 grew at a faster clip.

All right. Tom, how much of the growth overseas was Telmex? Historically, that was a pretty prominent international customer for you. I think they were doing a fiber-to-the-X build out?

None of the growth overseas in the second quarter was because of Telmex.

None of it. All right. Two other quick ones if I may. Optical Ethernet backhaul, I know you got products, can you give us some sense for where you are at in revenues?

I would say that -- well, we tackle that from a couple of different ways. We have a 5000 variant of that and we have an OPTI variant of that. I would say that is, that was not a meaningful portion of, let’s say, the upside pieces that we saw in the second quarter.

Okay. Finally, we’re only two weeks into the third quarter, but if you look at the trends in the first two weeks relative to historical seasonality, what are you seeing?

Well, usually at this point in time what we see is, we typically don’t see huge inflection points during this period of time. I’m going to hesitate to talk too much about the following quarter into the next conference call but I think our color on the quarter already gave you a sense of what we think we’re seeing.

Understood, appreciate it, thank you.

Okay. Bonnie, at this time I think we are past our cut off time, so I would like to thank everybody for joining us on our call and we appreciate you taking the time and we look forward to talking to you next quarter.

Thank you. This concludes today’s conference call. You may now disconnect.