Welcome to Arrow Electronics conference call to discuss their second quarter earnings. At this time, I would like to turn the call over to Greer Aviv for opening remarks and introductions.

Good morning everyone and welcome to the Arrow Electronics second quarter conference call. I am Greer Aviv, Manager of Arrow’s Investor Relations Program and I will be serving as a moderator on today’s call. If you would like to access today’s call via webcast, please visit our Investor Relations website at www.arrow.com/investor and click on the webcast icon. Presenting on the call today are Mike Long, Chief Executive Officer and Paul Reilly, Executive Vice President and Chief Financial Officer. Also joining us are Andy Bryant, President global ECS and Peter Kong, President global components. By now you should have all received a copy of our earnings release. If not you can access the release on the Investor Relations section of the website. Before we get started I would like to review Arrow’s Safe Harbor statement. Some of the comments to be made on today’s call may include forward-looking statements including statements addressing future financial results. These statements are subject to a number of risks and uncertainties that can cause actual results or facts to differ materially from such statements for a variety of reasons. Detailed information about these risks is included in Arrow’s SEC filings. We will begin with several minutes of prepared remarks, which will then be followed by a question-and-answer period. As a reminder to members of the press, you are in a listen-only mode on this call, but please feel free to contact us after today’s call any questions you may have. At this time, I would like to introduce our CEO, Mike Long.

Thank you, Greer and thanks to all of you for taking the time to join us this morning. We executed well in the second quarter, with sales and earnings per share at the high end of our updated expectations. Despite turbulence in the global economic environment and ongoing uncertainty in our supplier and customer base, our cash flow generation continues to be exceptional with more than 300 million in cash from operations in the second quarter, making our 11 consecutive quarter of positive cash flow generation. Additionally, working capital management remains at best if class levels with working capital to sales declining almost 300 basis points year-over-year. I am pleased to report that we have achieved a targeted level of expense reductions we communicated to you back in February, which enabled us to reduce expenses at a faster rate than the decline in sales on both the year-over-year and sequential basis. However, the cost savings we have generated through these initiatives have not been enough to offset both the ongoing sales decline in margin pressures we have experienced during this downturn. In light of this, we have an additional $100 million in annual cost reductions that will be implemented in the second half of 2009. Paul will provide you with additional details on the savings a bit later in the call. The actions we are taking will insure we maintain profitability and enhance our operational efficiency, while still moving forward with our strategy to growth sales and market share as well as optimize growth profit. Despite the challenges of a weakening economy and ongoing cost reduction activities we continue to invest in opportunities to enhance our growth and enable us to become more efficient in a productive organization. As I shared with you at Investor Day on June 4 we’re…

Thanks Mike. As reflected in our earnings release, there are a number of items that impact the comparability of our results with those in the trailing quarter and the second quarter of last year. I will review our results excluding these items to give you a better sense of our operating performance. As always, the operating information we provide to you should be used as a compliment to our GAAP numbers. For a complete reconciliation between our GAAP and non-GAAP results, please refer to our earnings release or the earnings reconciliation slide at the end of the webcast presentation. Second quarter sales of $3.4 billion were ahead of the midpoint of our expectations and represent a decrease of 22% year-over-year and a decrease of 1% on I sequential basis. Pro forma for LOGIX and excluding the impact of foreign exchange, sales declined by 20% year-over-year and 2% sequentially. Global enterprise computing solution sales decreased by 19% year-over-year and increased 5% sequentially to $1.1 billion in the second quarter. Although they were at the low end of our guidance, pro forma to include the acquisition of LOGIX and excluding the impact of foreign exchange, sales were down 21% year-over-year and increased 3% sequentially. The second quarter for ECS as once again demonstrated our commitment to improving productivity and efficiency along with maintaining financial strength. Our focused efforts resulted in operating expenses declining 20% year-over-year on a pro forma basis. Our gross margin decreased 40 basis points on a year-over-year basis we did an increase of 10 basis point sequentially as product mix had a positive impact in this quarter. Our operating margin was down 130 basis points year-over-year, against a very tough comparison and increased 10 basis points from the first quarter. Focused management of working capital resulted in a decrease…

Thanks, Paul. We performed well in the second quarter, hitting the high end of our guidance and exceeding street estimates. We have worked very hard over the last several years to make sure that we stayed financially strong and delivered solid levels of profitability while simplifying the business. We are cash flow positive throughout the cycle, have dramatically reduced our debt and have significantly improved our working capital management. We fully expect to continue protecting our balance sheet to insure we remain financially strong, which will allow us to take advantage of any of the opportunities that may exist to grow the business. The additional $100 million in cost savings we have targeted will enable us to streamline our cost structure and continue to improve efficiency. We showed you the evolution of our strategy at Investor Day and we are now going into the acceleration phase of that strategy. We fully intend to use the benefits of the efficiency gain from ERP implementations and the benefits of our balance sheet financial strength to go out and propel ourselves into new markets, new products and new customers. As a result of our efforts, we are well positioned to gain market share. However, we view this as a long term strategy that we are working on and I know many of you on the call today are more interested in the near term. As you heard us discuss business conditions remain challenges and we have seen accelerating sales declines in Europe, which is one of our most profitable businesses. As I said in the beginning of this call, we are taking the appropriate actions to maintain profitability and enhance operational efficiency while still moving forward with our strategy to growth sales and market share as well as optimize gross profit. Nonetheless, our ability remains limited and we are not prepared to call the bottom. Looking ahead to the third quarter, we believe that total sales will be between $3.1 billion and $3.7 billion with global component sales between $2.1 billion and $2.5 billion and global enterprise computing solutions between $1 billion and $1.2 billion. As a result of this outlook, we expect earnings per share on a diluted basis excluding any charges to be in the range of $0.25 to $0.37 per share.

Thank you, Mike. Please open the call to questions at this time.

(Operator Instructions) Your first question comes from Brian Alexander - Raymond James.

Just on the margin pressure on the components business, my quick math suggests that the gross margins in your components business were down maybe 100 basis points sequentially and maybe even 200 versus a year ago. Would you agree that’s kind of the order of magnitude we are talking about, and could you talk about how much of the margin decline in components is due to geographic mix versus competitive pressures? Finally, on that subject, is more of that competitor pressure is it coming from competitors or is it more coming from the supplier community? And then I have a follow-up.

Hey. It’s Paul. Thanks for joining us. Your numbers are in the ballpark, correct. When we look at sequentially and year-over-year, about 50% of that change is driven by geographic mix. So that is the first driver absolutely the first driver. Another driver would be a change in mix in our product sets, which impacts that and then finally as you suggested there is margin pressure more at, what I would call the customer level than at the GP level. So more at what we compete at the customer than from the supplier.

So, I guess the follow-up would be Paul, what’s going to cause gross margins in the components business to rebound from where they are today? Do you need to count on supply demand imbalances, IE shortages to drive the gross margins higher? Or do you think even a gradual recovery could bring the gross margins back to where they were before? I’m just not clear how we get back to, where we were maybe three or four quarters ago? Thanks.

If we had a hard allocation, in fact GP would go well ahead of where it was just four quarters ago. So, for sure there are lots of different bits and pieces that are impacting the margins going back-up, but the first thing that would happen is we show a stability and growth in North America and in Europe even at a slower pace than Asia Pac, GP would back up. The second thing would be that, the pace of recovery could impact GP. So if this was to be a D-type recovery, we’d see a rapid increase in GP and if it was to be more like U, we’d see a more gradual increase. We don’t see any indications that this is a permanent change in the way that customers approach to the business. I guess the last thing I would say, Brian is that remember the richer GP comes from supply chain engagements, and those are a much bigger percentage of our business in Europe and North America than they are in Asia Pac today. So as those markets grow also, in addition to just having an impact on the leverage or in the mix, we’d also see an increase in supply chain engagements which have a higher or richer profitability profile.

Brian, this is Mike. I’d also like to add that, our design win activity is up to record levels not only in North America and Europe, but also in Asia and as those sales rebound with the new products coming out, they are at a much higher margin profile than we have right now. So we do believe that, we’re in a position to regain most of the margin decline that we’ve seen.

Your next question comes from Craig Hettenbach - Goldman Sachs.

If I could just follow-up on the gross margin and really put design creation. Do you have much visibility from your customers in terms of the pipeline and when those products would be set to release over the next couple of quarters?

Actually, what we have right now is limited visibility that we’ve set. The visibility in the go forward business, if you will would allow us to forecast out much longer than we can today. Our customers today are really coming in and buying and augmenting the inventory that they have on their shelf, and thus are not making longer term commitments. That’s what gives us the limited visibility to what we’ve had in the past. What we can tell you is, as the market starts to return, and we see those new products being released we have a higher percentage of designs today, than we have had at any other time, which would suggest that the margin on those would be higher and we would get a positive mix going forward, but that’s about as far as I can go and tell you right now given the visibility we are seeing from the customer base.

If I could follow up on the topic of M&A, with the balance sheet and good shape and cash flow generation strong, any thoughts about potentially going on the offensive or what you seen in terms of opportunity for M&A both components and ECS.

So far today we continue to evaluate the opportunities we’ve seen in the marketplace that would help us round out our portfolio if you will and build some strategic capabilities that we couldn’t build internally. We have been and we are going to continue to be disciplined in how we evaluate these acquisitions to insure that they’re really aligned with our financial strategic and cultural goals. So, regardless of where we are in the cycle, we are disciplined about our approach and we will be taking advantage of those opportunities as we do present themselves, either now or later in the cycle.

Last one if I could, I know you mentioned the components business in North America has jumped around a bit, strong month of June, any visibility into the start of July here for North America components?

As we said, the North American business was inline with the low end of normal seasonality and we did experience a strong close to the month of June, which did carry into the first couple of weeks of July and both our bookings and billings showed an increase for the quarter and out backlog was up for the first time in several quarters. We did end June with a book-to-bill of 1.06 which is above the previous quarter and even a year ago level and we are also seeing that our cancellation rates are down to the lowest level we have seen in the last 12 months. That’s why we believe that looking into the third quarter we’ll expect to be in line with normal seasonality.

Your next question comes from William Stein - Credit Suisse.

Following up on the last question and the comments from your Analysts Day about new vertical market focus and the components business, you kind of restated that on the call. Should we think about this as perhaps a shift in strategy, a bit more toward developing growth internally as opposed to acquiring companies?

I would call it augmenting. We are in a position that we can take advantage and will take advantage of opportunities that exist to help us grow geographically or by product, or augment our current quarter sales. We are making sure that we can grow organically as well, and the vertical strategy is as a result of what fundamentally happened in the business over the last several years that a lot of the big CMs if you will have moved out of North America and what we are seeing now is a wider range of customers in different segments that have different requirements. So we’ve aligned our sales force to those segments, to give the customers that are here today, that are designing and growing their business more support and in essence attempting to grow our customer base at the same time.

Then on the system side, it seems that the guidance for next quarter is quite a bit higher than normal seasonality. Do I have that right and can I read that as maybe a bit of a push some revenue maybe on the server side, from June to September?

What we have seen is the, the business climate is still tough. What you may be see there can is a little bit of mix of your services software and storage. They’re really helping us weather this downturn and they’re really helping us weather specifically the drop off in server sales. The visibility does remain a little limited. We don’t see the bottom yet, but we are seeing a favorable mix in our forecast going forward r in the third quarter.

Really, I guess the point I am trying to make is I think normal seasonality is down about 10%, in September and do I have that right? And you are guiding I think…

Paul, do you want to.

Sure, Mike. You’re absolutely right. The normal range is 5% to 15%, down in this quarter. Keep in mind we are a little bit disappointed in Q2. We think we are going to get that back, but there is a meaningful impact when we start to see increases in product that’s like software and services, where we use net revenue accounting in accordance with U.S. GAAP and we have servers and storage where we use gross. So really what we’re seeing is that we’ll see a bit of a clang in mix and that accounts for vast majority of the change when you look, and try to compare seasonality. Finally, also there is some impact from foreign exchange with the euro up by it look yesterday, but it’s up 141, 142 and in the second quarter it was like 136 for us or in that range. So there’s an impact to that also.

Your next question comes from Matt Sheerin - Thomas Weisel Partners.

So just following up on Will’s question regarding the computing business, as you said it was at the low end of your guidance. How much of that was affected by Sun Microsystems and the pending acquisition, where you saw any impact or negatively at fall customers there?

We did not see what we would call something abnormal between our suppliers in the quarter. That business for us held up pretty well going through quarter. It was down some, but overall it wasn’t worse than our other suppliers. I do believe that with a little clarity around the Oracle and Sun merger that we will see benefits. We’re partners with both of these guys, and I think that in the near term they’ll get it right and start putting out more information, but we don’t believe or I don’t believe what you had alluded to, and others have alluded to regarding the commission incentives affected us all that much as the distributor.

So it was down evenly across your three platforms?

I think you could safely say that, yes.

Then moving back to the components and your guidance there, I think you said that Asia which had been above seasonal levels in the last quarter or two is trending below seasonality a little bit in September. Is that right and can you explain that?

Yes, Peter, would you like to.

Yes, I think that’s mainly because of the second quarter is a lot stronger than the normal seasonality. So as a result, you will see performance below seasonality.

Would you say then there were some inventory build just in anticipation of production going up in the third quarter? Is that it?

I think that happens actually in the second quarter. That is some inventory replenishment, which really drives the growth in the second quarter.

Then Mike you talked about normal seasonal trends in North America and then below normal in Europe. Could you remind us what the seasonal trends are by region for components?

Yes, the North America seasonal trend is flat to minus 2%, in Asia its plus 15% to 20%, and Paul do you have the number off the top of your head for Europe.

Yes, Europe is also flat to minus 3%, 4% it’s impacted by currency also, but that’s the range what we see from Q2 to Q3.

One final question if I may, regarding the cost reduction program, the new one in primarily in Europe; that looks like a big slug of your overall expenses there, obviously a pretty big undertaking over the next few quarters. Could you tell us how that plays out maybe by dollar amounts and when you start to see the real savings, and then also what you’re going to do to try to prevent any distractions or interruptions in business as you consolidate both offices and people?

Matt, in looking at it, you know and I guess everybody knows that you need to get work council approval before you can actually execute on these types of actions. So we’ve actually gone through and got a piece of that out. Already there’s approvals are out and we’re waiting on some others, the work counsels have been support of actions as they face the realities of the economic conditions there. We’ll probably be at full run rate for the European piece in the fourth quarter, starting October 1 give or take, the rest of the world will see the impact at least for half of the Q3 time period also. It is spread out across different functions and responsibilities. One of the things we are continuing to do is to protect the sales teams. So, really what we are seeing is that there’s a minimal impact on sales compared to other functions. A lot of it is coming through delayering management; a lot of it is coming. So those folks that are focused on customers are not being impacted in general and where there are sales type roles being impacted, that are very high level that’s not impacting the day-to-day execution with the customer? So, we would expect minimal impact, if any at all with the customer level. That’s true even at the supplier level.

I would like to add to that, even with our first wave of cuts and the second wave, we have not been targeting our sales force or our design engineering sales force. As we have said we have seen design levels at a high rate. That does have a direct impact on our margin, and our sales people do have a direct impact on our customer service. Those are two areas that given our strategy that we laid out at Investor Day that we want to make sure that we impact or save and keep those people employed as we go through the cycle.

Your next question comes from Steven Fox - CLSA.

First of all, a little bit surprised by all of the questions about normal seasonality given the cycle that we’re in terms of the recession. I was wondering some of the comments you made about what your customers are talking about in terms of component demand for the rest of the year. If you step back and sort of gadget what type of recover we potentially can have, what are the good signs versus the bad signs you are seeing that you are seeing right now and we should maybe pay attention to.

Sure. A good sign is, as we have already highlighted to you has been the amount of design work that is going on in the field in all three regions. We believe that even though the business has dropped off, that many customers are continuing to invest in new products and new technology; that as the market starts to return those sales will start to kick in. I can consider that something that givers me great comfort around the margin. The negative cycle, Steve that we have also discussed with you has been the unpredictability of the daily sales rate, and those sales rates have a high fluctuation in them and once those daily sales rates start to level out and become more predictable, our visibility will go up. So, today while we have seen an increase in June in the North America business, we still see some volatile in the daily sale and that’s something that doesn’t give us enough comfort yet to call the bottom throughout the industry. Steven Fox – CLSA: Secondly on the enterprise business, you mentioned deferrals, further look at just enterprise spending at the customer levels, was that a backward looking comment about the June quarter, or are you still seeing it in this quarter and what could it mean for the rest of the year when you we normally see a descent spending.

As you know, what we have moved into with the computer business is that the last month and specifically the last couple of weeks of the quarter have started to be the biggest ship days are not started, but the business has been more augmented by the tail end of the quarter. As we look at our pipeline, some of the systems if you will get pushed a little bit in to the next quarter. I wouldn’t suggest that they go away; I would say that they do that for budgetary reasons. The funnel today we do believe supports the guidance we gave you, but again our visibility in this business is actually more limited than the components business, because the daily rates at the beginning of the quarter are at the most volatile for us.

Your next question comes from Shawn Harrison - Longbow Research.

Getting back to the restructuring savings, if my math is correct it’s about $0.60 and annualized benefits earnings are about $0.15 a quarter as you enter 2010. Are there any headwinds to that that would dilute the impact or should we expect earnings power because of these savings to improve $0.15 once the actions are completed?

Shawn, remember as a starting point, that we intentionally included in our first wave what I would call temporary cost savings and I use as an example, to sacrifice of employee benefits or reduction in target levels of incentives and furloughs. We’ve had some conversation that ‘what pace will they comeback when the recovery is in place?’ So when you look at it, I can’t tell you when they’re going to comeback, because I can’t tell you when the recovery is going to occur, but we’ve been very thoughtful in trying to project to the future that we had to cover those costs with other types of permanent actions. We think that’s in our next round of cuts of about $100 million. That’s the one caveat put out there. Then as to your question itself, one other things that we have to be careful about is, the 175 is fully baked into Q2. So then we got to talk about ‘okay, if you have $100 million plus going in,’ going forward, if you say, you got to cover the temporary costs that brings it down to 60, then you got a tax effected that’s $36 million bucks, that’s comes out to about $0.30 and you break that down by quarter, it’s about $0.07 by the time you get a full run rate, which we expect to be in Q4. So for sure we’ll see some EPS pick-up in 2010 as we get a full year impact, but I think it’s a little bit less than the numbers you were putting out there.

I wanted to be sure not to gross up the EPS impact too significantly. Second, just on your inventory positions, do you see on the components side continued inventory reduction activity in the back half of the year or are you happy with kind of where the turns are looking into the second half of ‘09?

Shawn, we are not troubled by where our inventory levels are today. We think that it’s the appropriate level for business activity in the third quarter. If there was to be a pick up in activity levels in the fourth quarter, that we can see as we get through Q3, we might be increasing inventory levels to match that. If there was to be a decline in the fourth quarter, I would imagine sometime in the third quarter, we might trend downward. What we’re really focusing on is, the quality of our inventory. Remember that that’s an important aspect going forward. The other factor is that, we did see a pick up in what I would call some supply chain engagements in third quarter. Some times that inventory turns slower, so when it comes out it has an ordered effect on the inventory turns. So we’re managing it in total. I don’t see a real need for us to reload hard or to drain it even harder and quite honestly we manage all the working capital as a single pool and actually what we’re focused on is, opposed to just one line item which would be the inventory.

Two final quick follow-ups, any updates on the Cisco you see as initiative and that maybe just commentary on share gains? I know they’re pretty strong over the past nine to 12 months?

Okay. On the Cisco, I think Andy, would you like to weigh in on that.

Well the Cisco process has been very good. We met with Cisco management in the month of July. I think it’s safe to say, ours has been a very proactive two-way dialogue with how the value-added channel might benefit Cisco’s enterprise data center strategy. The channel executives for Cisco are in the pros of going through some decision making and I would expect that some time in the coming quarter a decision will be forth coming.

Your second question, around market share, thanks for noticing. Yes, we are pleased over the last couple of quarters and our sales force really rising up to the challenge and going out and generating some new business for us in this downturn. The attitude for us of our sales force has been good. They continue to support their customers. They continue to support them with design activity and making sure that their inventories are delivered on time. We are enjoying some of the highest rates, our fill rates if you will on time deliveries that we ever had. So, we are not viewing our inventory as a problem, and all-in-all during the time our customer complaints are at an all low level. So we are pretty happy with the sales force continuing to support the customer base.

So, suffice to say that your rate of gains, you’re still continuing at a pretty similar level.

Right.

Your next question comes from Brendan Furlong - Miller Tabak

Basically circling back, and a bunch of questions have been asked already, but on the component operating margin and weakness, how much of that is weighted to Europe and how much of it is gross margin related versus operating census.

When I look at it, it’s being driven by when you talk about the operating income level, two big factor, one is the sales decline, but as we’ve talked about we’ve been able to call back most of that drop in operating income percent through efficiencies and cost action. So the big driver this time around is gross profit. As you mentioned about 40% to 50% of the GP decline in that business is driven by mix. Then if you look at the individual regions, so the other 50% which is driven by real margin pressure at the customer level, I would say that Asia-Pac and the North American businesses are right around the same level, though the level of pressure in Europe from the customer side is probably 2X, what we were seeing in the North American and Asia Pac regions.

On the gross margin, by my estimates, roughly you’re below 13% on the gross margin line on components. When do you think you can get back over 13% again? Just on the higher level, bigger picture, I know you’re not going to talk about 2010, but on the bigger picture level and gross margin for 2010, what should we think about it?

Again, one thing that we’ll be dependent will be upon the pace recovery, the second thing that we’ll be dependent upon is our growth initiatives with the vertical markets, whether they’re geographic, those have an impact also. The recovery will drive the phase of supply chain engagements and design wins going from new product R&D to new product introduction. So a lot of it’s dependent upon the economy. One of thing that we had done; it’s really interesting when you look at it. Our operating income percent is really if you break it down by region, very nice in our ECS, in our North American components, so both businesses in North America. You look in the Asia-Pac business, it’s still pretty stable there. So, the big drag for us right now is Europe and we think these actions we are taking now, even with the minimal sales recovery in 2010 would get Europe back to more traditional levels of operating income performance.

To the point on Europe, the PMI data of Europe and some of the semiconductor guids you’ve been supporting this earnings season, showing some incremental demand if you will on the industrial and even the auto segment out of Europe, should we expect somewhat of a seasonal Q4 for your component business out of Europe, better than it is right now, put it that way?

Well, as we said before, traditionally distribution tends to lag what we hear from your suppliers and while we have heard the same thing you did around the industrial market, and around the automotive market, we have not seen our booking rates stabilize that I’d be able to validate your question.

Your next question comes from Sherri Scribner - Deutsche Bank

I was hoping to dig into the balance sheet a little bit following on Sean’s question. In terms of the cash conversation cycle, at least my math and the way I calculate it, it looks like you’re at a pretty low level for your cash conversation cycle. If you’re managing the balance sheet sort of as one group, would you expect those levels to stay the same as we move into 3Q and 4Q or do you think we’ve really hit a bottom on the cash conversion and you’ll start to see that tick-up through the end of the year?

I would say that our cash performance to-date and our cash-to-cash cycle has outpaced our expectations. So to keep rate of improvement every quarters sequentially is going to be tough for us. I do think there’s opportunities for us to improve the cash-to-cash cycle and I think we’ll able to do that. To be perfectly frank, I’m not sure we’ll see that improvement in Q3, but for sure I would expect that to happen again in Q4.

Then in terms of the PP&E, it looks like it ticked up sequentially and it doesn’t look like your CapEx ticked up, so I’m just trying to understand, did you build something? Why would that number be moving up a little bit?

The major driver for our increasing PP&E and the major driver of capital expenditure is all around our ERP rollout and that’s the biggest driver. If you’re looking at it on a gross basis, if there’s any difference beyond capital expenditures, it would be because of the change and foreign exchange rates, which ticked up from the end of the March quarter, which is what you use for the balance sheet end of quarter, to the end of the June quarter.

Your next question comes from [Amanda Buroer] - Brean Murray.

I guess just a follow-up to the cash. The cash cycle, the result of which drove sort of net interest expense down pretty substantially in the quarter, given the way you guys are driving cash, is that the current level sort of the correct level to think off for the near future. Can you even improve or are you guys internally even thinking of further improvement in that area?

Well we’re always looking at our capital structure, and one of the thing is that we have to make sure we strike the proper balance; it’ll be for all of our stakeholders. So that would be, our shareholders or lenders, our willing to finance the company for growth. So those are the things that we have to balance out and they’re impacted in the short term by the credit markets themselves. So we’re constantly trying to evaluate that, but one thing we don’t want to do is to be in a position where we’re paying too much or too little interest, and we’ll just keeping managing that the best way we can. Obviously, that’s also impacted by things like changes in interest rates on a macro basis. We have cash that’s invested that earns a return, and we also have fixed and floating rate debt next year. So if rates were to go up, we’d earn more on a deposits, but we’d also have to pay a bit more on some of our borrowings, rates go down it’s just the inverse.

So I mean, I guess as a takeaway of all, sort of I guess current levels are reasonable, sort of twice triangular around for the near future until we see any significant changes in rates and stuff?

I would say that’s for sure for the third quarter and I’ll have to see how we come out of the quarter from a cash-to-cash cycle and what our cash flow generation is and then we’ll see our thoughts for Q4 at that time.

Then just one quick clarification follow-up, back to the inventory comments that you guys made and then your satisfaction of your current inventory levels going into 3Q; I just want to make sure those were with regard to your overall inventory and not just components inventory.

Absolutely, for the whole business.

Your next question comes from Jim Suva - Citigroup.

Kind of a simple question here, it maybe difficult to answer, but when is Europe going to get to the level of operating at the level of being satisfied. It seems like we’ve been talking about Europe for quite some time long?

I’m going to take a shot at answering that one first. We’ve been talking about the decline in Europe probably for about three quarters. Remember that historically and for sure we’ve seen that even now. The European marketplace has traditionally trailed North America by two to three quarters, that’s true. This recession with the exception of the U.K., which probably entered the recession, because of the same type of mortgage pressures etc, at the same time the U.S. did. So we’re seeing history repeated itself here. So we are at really one to two quarters now of acceptable level of performance in North America. So I would suggest that we’re probably one to two quarters away; I would say two quarters, not one, quarters away from getting back to acceptable levels of operating income performance in European business. So, in my own mind I would say we fully expect internally to be back to acceptable levels January 1, 2010. Though I’m hoping none of your European colleagues are listening, because we’re going to tell them we expect that October 1, 2009.

I would now like to turn the conference back over to our speakers for any additional comment or closing remarks.

Thank you. Before ending today’s call, for those participating in the webcast we will quickly scroll through the slide referenced in our webcast, that contain a reconciliation between GAAP and adjusted results. This reconciliation is also included in our earnings release and both the release in this presentation will be available on our website. I would like to thank all of you for taking the time to participate in our call this morning. If you have any questions about the information presented today, please feel free to contact Paul, Mike or myself. Thank you and have a nice day.

That will conclude today’s conference. We thank you for your participation.