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’: With us on the call today are Mike Long, Chairman, President and Chief Executive Officer; Paul Reilly, Executive Vice President, Finance and Operation and Chief Financial Officer; 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 our release on the investor relations section of our website. ’: With us on the call today are Mike Long, Chairman, President and Chief Executive Officer; Paul Reilly, Executive Vice President, Finance and Operation and Chief Financial Officer; 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 our release on the investor relations section of our website. ’: With us on the call today are Mike Long, Chairman, President and Chief Executive Officer; Paul Reilly, Executive Vice President, Finance and Operation and Chief Financial Officer; 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 our release on the investor relations section of our website. ’: ’: ’: ’: At this time, I would like to introduce our Chairman, President and CEO, Mike Long.

Thank you, Greer, and thanks to all of you for taking the time to join us today. The second quarter was another outstanding quarter for Arrow; as we achieved record level second quarter revenue and earnings per share. Both business units drove the strength in this quarter with continued strong momentum in global components sales, which increased 44% year over year, and better than expected sales growth of 21% year over year in ECS. In addition, our cash flow generation was very good and came in well ahead of our expectations. Operating income growth substantially outpaced sales growth on both the year-over-year and sequential basis. Our operating income margin reached the highest level since the fourth quarter of 2007. Earnings per share more than tripled year over year, substantially ahead of our revenue growth. And we also had a new record for return on working capital, which exceeded 36% in the second quarter and is more than two times greater than a year-ago level. Return on invested capital is also near record levels. These results clearly demonstrate our commitment to sales excellence, operational excellence and the ability to maximize shareholder value. Time and time again, we have proven our ability to manage well through cycles. As you will hear more in detail later in the call, all of our components regions contributed to the superb second quarter results, and we continue to see an upward trend in gross margin. Both the global components and the global ECS businesses posted sales ahead of normal seasonality. ’: Following the end of the second quarter, we achieved another milestone in our global ERP implementation with the successful go-live in our northern European components business on July 6th. As a result of this go-live, the global components team in northern Europe is now managing…

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 results. As always, the operating information we provide to you to be used as a compliment to our GAAP results. For a complete reconciliation between our GAAP and non-GAAP results, please refer to our earnings release for the earnings reconciliation slide at the end of the webcast presentation. Second quarter sales of $4.6 billion were ahead of our expectations and represent an increase of 36% year-over-year, an increase of 9% on a sequential basis. This is the third consecutive quarter of year-over-year sales growth coming out of the downturn and represents a record level of revenue for Arrow. Operating income grew more than 2-1/2 times on a year-over-year basis. Global component sales of $3.3 billion increased 44% year-over-year and 4% sequentially, an increase of 46% year-over-year and 7% sequentially, excluding the impact of foreign exchange. Gross margins increased 170 basis points year-over-year and increased 40 basis points from the first quarter that rebounded to 2008 levels. We reduced our ratio of operating expenses to sales to a near record low level this quarter, as we have remained focused on operational excellence and running the business at best in class levels. Our operating profit grew five times and four times faster than sales on a year-over-year and sequential basis respectively, again demonstrating exceptional expense control and operating leverage in our business. ’: ’: Sales in the Americas increased 54% year-over-year and 11% sequentially, substantially ahead of normal seasonality. Our growth is driven by strength across the board in both semis…

Thank you, Paul. In summary, our results speak for themselves this quarter, with record level revenue and earnings per share, exceptional returns and very good cash flow generation. Our components business posted another terrific quarter with each of our regions experiencing continued momentum and robust growth trends while generating significant increases in profitability and returns. ’: We are in a period of accelerating sales right now, and we believe we are outgrowing the market. There is significant earnings leverage inherent in our model, and we expect to generate premium earnings and returns for all of our shareholders. I would personally like to thank all of our employees around the world for a job very well done and their unwavering commitment to our long-term success. Looking ahead to the third quarter, we believe that total sales will be between 4.39 and 4.79 billion, with global component sales between 3.32 and 3.52 billion and the global enterprise computing solutions sales between 1.07 and 1.27 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 $0.96 to $1.06 per share. Greer.

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

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No, in systems we have not seen an impact in our business. You saw the numbers that we just reported in Europe for Q2, and so quite honestly business has remained pretty strong.

Okay, thank you.

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Great and then just one final question. I think, if I include the September quarter, you basically would have seen five consecutive quarters of better than normal seasonality in your components business. Mike, just curious, when do you think we should get back to seasonality, would it be the December quarter? And then, do you have any concerns that we probably could see below normal seasonality as we exit 2010 into the first half of 2011? ’: ’: ’:

Thanks a lot for the incremental color. Okay.

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Alright, thank you very much and congratulations to you and your team on our great results and the profitability is very commendable. Can you talk a little bit more on the inventory, exactly how much of it was organic versus I believe you closed three acquisitions in the quarter? ’: ’:

Hey Jim, it’s Paul. Let me lead off with your question around the impact M&A. In fact, if you think of the three acquisitions, Sphinx is one in the ECS business, which you know has inventory turns that are 20 to 30 times. The second one was in Converge, which has very low inventory requirements and high inventory turns. So that was less than $10 million for Converge, less than about $10 million for the Sphinx acquisition. And the other acquisition has no inventory at this point in time. So if you look at it, about $20 million of increase comes from M&A and the rest is organic growth.

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Yes, I think Jim, what we would see is something that would be more flattish with what we have right now at the end of the second quarter.

Alright, thank you and congratulations again for great results, especially on the profitability.

Thanks a lot.

And Matt Sheerin with Stifel Nicolaus will have our next question.

Yes, thanks, and good afternoon. So a question on your gross margin, which was obviously up nice year-over-year and sequentially. I know that some of it was mix related, but how much of it was a benefit from overall pricing, given that you do have inventory and you do have certain customers that are asking for expedited orders, which obviously puts you in a better position. So, is your pricing helping you here?

Hey Matt, it’s Paul. Let me first start off by saying that gross profit was up year-over-year in all regions, and that has nothing to do with mix. So look at each of the individual regions and you look at two business segments, so we were up in each region around the world.

Okay.

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Okay, great. And just finally on your comments about components, it looks like Asia was up about 1%. Is that seasonal? It looks like it might be a little bit less than seasonal? Are you starting to see any signs of sluggishness in Asia at all?

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Matt, I think I can help you a little with the Asia Pac piece is that, we still saw a consumer very strong. The data processing business, the industrial business, the lighting business and the automotive business were all up more than double digits. The only place we saw a slowing in Asia Pac region, which is what equates to our ultra source business, was in the communication market. Every other market there, we did see relatively strong increases quarter-on-quarter. So we can pinpoint it directly to the communications business.

Okay, so the book-to-bill in Asia in that core business that you talked about, is that in line with the company average then?

Yes.

Okay, alright, thanks a lot.

Alright.

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Okay. And then just on the computing business, the Sun Oracle relationship, how much incremental revenue do you think from here is at risk? And is that really what the primary delta is in terms of your Q3 outlook, relative to what we would consider to be normal seasonality, although I realize that’s changing?

Yes Brian its Andy. We’ve seen in our entire proprietary server portfolio, we almost got back to a little growth in the second quarter and Sun was actually the second strongest line in the quarter. So, I think our risk is mitigating. I think we see an opportunity actually to have an upside in Europe. We are undergoing an expansion with Oracle Sun in Europe as they look at the countries that they want to roll out their value-added distributor model in. We’ve been assigned a global account rep from Oracle, which is a positive sign. So we just have to see how their product cycles play out and where they go with their hardware sales, but I think we are getting to the point where the risk of revenue decline is going to mitigate a bit.

And then final question, how should we think about, maybe for Paul, the operating margin progression for the computing business in the back half of the year, given that your largest supplier is refreshing its mid range line, and this tends to have above average margins. So that would suggest that your mid range of mix probably gets better in the back half of the year, certainly in Q4, and you’ve got incremental cost savings. I think you said earlier of about $12 million going forward. So should we expect some pretty meaningful operating margin expansion in the computing business on a year-over-year basis in the second half?

Your analysis is correct. Its the pace of new product introduction that picks up in the fourth quarter around proprietary service. We should see a good uplift in operating margin.

Thank you very much and nice job.

Thanks Brian.

And William Stein with Credit Suisse, will have our next question.

Great, thanks. I’m wondering if the component shortages that you discussed limited your own revenue in the quarter, on the component side in particular obviously.

That’s an interesting question. We believe that we’ve been going at it the last several quarters with about the same amount of unfulfilled orders. So pending the orders flopping into the next quarter, we think right now we are doing a pretty good job filling what we have and we would expect to stay on that pace. ’:

It sounds like there was some mixed opportunity, but it didn’t increase sequentially.

’: But today, from what we are hearing from our customers, the standard flow of production and the line down situations are much much less than they were a quarter ago and even a quarter before that.

Okay, and then like everyone else I’m also going to focus on systems for a second. It looks like if assuming the Converge and Vertical revenue was contemplated in the guidance, it looks like organic growth is down about 18% sequentially, which it looks like well below the low end of what used to be typically seasonality.

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That’s the September guidance.

Oh, sorry about that.

Yeah.

Yeah, so we still think we’ll be within the low end of normal seasonality for Q3.

Thank you.

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Hi, good afternoon. Not to beat a dead horse on the inventories, but is there any way to parse the difference between, say the fast-moving parts in the components inventory and the slower moving parts? And then secondly, could we step back and look at the computing business from a cyclical standpoint. Any signs that you would point to that the cycle has legs beyond say Q4 of this year that would be encouraging to investors at this point.

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Okay.

’: As an example, everyone knows proprietary servers were suppressed going into the quarter, but we did see a 21% increase in proprietary servers quarter-over-quarter and they actually outpaced the increase in industry standard servers for the first time in a long time. Our storage products are still growing very strong year-over-year in the 29% range. Having said that, as we are looking to the seasonally strong fourth quarter, right now, we see no reason to expect anything other than normal seasonality going into the second half of the year here.

That’s encouraging. Thank you very much.

Right.

And just a five-minute warning. Next we’ll move to Brendan Furlong with Miller Tabak.

How are you doing everybody? Earlier on in the call in the preamble, you said that the gross margin is in an upward trend. Nobody seems to have challenged you on that one and I was just curious if you could throw some color on what that upper trend actually means.

Yeah. From our viewpoint, you may recall that we saw a rapid sharp decline in gross profit entering the economic malaise if you will, that started in 2008, and we said that the recovery would continue slow, slow for sure, about the same pace as the downturn. So we continue to see on a region-by-region basis improvement in gross profit percentage. So we still see that momentum continuing into Q3 and we see normal seasonality, which is fully our expectation into Q4. Then we would expect to see that GP continue to move upward.

With that said, if it was growing to a halt, but lead-times stayed around normal, there should be no negative impact on gross profit percent. And as we’ve been saying, the biggest area of opportunity regionally for us in gross profit is in Europe. And Europe really came into the recovery about two quarters later than North America. So we would think that if you were to see a slowdown in the recovery in North America at the top line, we probably have two more quarters to go in Europe. So we’d see that also continuing to grow. So it’s a lot of different data points, a lot of different moving parts, but doesn’t necessarily mean that it would shut down in one quarter. And for sure, at that point in time we’d still look for opportunities to increase it, and don’t believe that there would be a decline in gross profit then. ’: With that said, if it was growing to a halt, but lead-times stayed around normal, there should be no negative impact on gross profit percent. And as we’ve been saying, the biggest area of opportunity regionally for us in gross profit is in Europe. And Europe really came into the recovery about two quarters later than North America. So we would think that if you were to see a slowdown in the recovery in North America at the top line, we probably have two more quarters to go in Europe. So we’d see that also continuing to grow. So it’s a lot of different data points, a lot of different moving parts, but doesn’t necessarily mean that it would shut down in one quarter. And for sure, at that point in time we’d still look for opportunities to increase it, and don’t believe that there would be a decline in gross profit then. With that said, if it was growing to a halt, but lead-times stayed around normal, there should be no negative impact on gross profit percent. And as we’ve been saying, the biggest area of opportunity regionally for us in gross profit is in Europe. And Europe really came into the recovery about two quarters later than North America. So we would think that if you were to see a slowdown in the recovery in North America at the top line, we probably have two more quarters to go in Europe. So we’d see that also continuing to grow. So it’s a lot of different data points, a lot of different moving parts, but doesn’t necessarily mean that it would shut down in one quarter. And for sure, at that point in time we’d still look for opportunities to increase it, and don’t believe that there would be a decline in gross profit then.

Okay, that’s kind of what I was looking for. And then my other question, the SG&A that end at sales were pretty much record lows. Do you plan to keep it at kind of record lows on a quarterly basis or am I reading too much into this, that you are kind of expecting things to moderate so much next year and that’s why you’re keeping your expenses at such low levels?

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Excellent. Thank you very much.

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Hi. Thank you. You provide a bunch of different details on the segments and geographies. I was hoping we could maybe take a step back and if you could give us like, your view on how the geographies are progressing. I know Europe was a bit behind. It seems like from your commentary that all of the geographies continue to move along and you are not seeing any hiccups. I just wanted to get your thoughts?

’: The core business that we have was really particularly strong, growing almost 50% year-over-year. And then we saw as I had indicated before, strong performance in a lot of the vertical markets around lighting industrial and PEMCO and automotive and the slowdown that we saw there was in our lower margin, ultra source business, primarily tied to the communications market. So overall we’ve seen a pretty good marketplace there. ’: The vertical markets, we did see several of them start to kick on, but we saw I would say the exceptional market for us, where transportation and lighting, and lighting continues to be the best growing segments. So we see that continuing on if you will for Europe. Our sales in North America if you will were substantially added. While I would say normal seasonality would be there, but that was driven across the Board in both semiconductor products and in our passive products. We did have notable growth, if you will in the aerospace and defense and lighting market industries, but what is really encouraging about North America is the daily run rates improved as the quarter went on and our backlog, meaning customers placing long-term orders on us was also up compared to the first quarter. So we expect the sales to continue in that market, and really the vertical performance there, again airspace, alternative energy, lighting were the main drivers for the quarter for us.

Okay, that commentary is helpful. And then at the analyst day there was a lot of questions about Europe and the impact of what was perceived at that time to be a weakness in Europe. It doesn’t sound like you saw any weakness in Europe. Just wanted to get a sense of did you have currency impact from what was going on during the quarter?

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And Sherry, from a currency translation impact, it was about a negative $0.02 for us this quarter, compared to the rate we use for giving guidance.

Right. Okay great. Thank you.

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Hi good afternoon. Hopefully, two brief questions. At ECS, EBIT margins were up slightly year-over-year, even though sales were much higher. Is the variance just in the terms of where they potentially could be, just solely mix right now? And to your earlier comment that you would just need to see some server refresh be relatively healthy from your largest customer coming back in the fourth quarter, and you should see a more normalized level of profitability there?

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Okay. Thank you very much.

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Correct.

Any sense of -- I mean, is there a timing limitation as to when you exhaust the full 125 or any sense of how we should think about your interest in buying stock at these levels?

’: Amit Passi – UBS: Okay. Alright, thank you.

And that will conclude the question-and-answer session. I will turn the call back over to the speakers for any additional or closing remarks.

’: I would like to thank all of you for taking the time to participate in our call this afternoon. If you have any questions about the information presented today, please feel free to contact Paul, Mike Taunton or myself. Thank you and have a nice day.

And that will conclude today’s call. We want to thank you for your participation.