Good day, ladies and gentlemen, and welcome to the Third Quarter 2011 Arrow Electronics Earnings Conference Call. My name is Tuwanda, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Ms. Greer Aviv. Please proceed.

Thank you, Tuwanda. Good afternoon, everyone, and welcome to the Arrow Electronics third quarter conference call. I'm Greer Aviv, Senior Manager of 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. With us on the call today are Mike Long, Chairman, President and Chief Executive Officer; Paul Reilly, Executive Vice President, Finance and Operations and Chief Financial Officer; Andy Bryant, President, Global ECS; and Peter Kong, President, Global Components. By now, you should have all received the copy of our earnings release. If not, you can access our release on the Investor Relations section of our website. I would also like to point out that we issued a CFO commentary that has been posted to the Investor Relations section of our website that should be used as a complement to the earnings release. You can access a copy of our earnings reconciliation for the third quarter and our press release or on the Investor Relations section of our website. Before we get started, I would like to review our Safe Harbor statement. Some of the comments we may 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 could cause actual results or facts to differ materially in such statements for a variety of reasons. Detailed information about these risks is included in Arrow's SEC filings. We will begin with a few 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 with any questions you may have. 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 your time to join us today. We had another record-breaking quarter. Third quarter revenue of $5.2 billion, increased 11% year-over-year and it was in line with our guidance. Global ECS sales were in line with the high-end of our expectations, while our components sales came in below our expectation. Earnings per share of $1.20 represented the highest third quarter level in company history and the sixth consecutive quarter of record earnings. Based on our guidance for the fourth quarter, we're on track to achieve earnings per share in excess of $5, an increase of more than 20% from 2010's record level. Gross margins continue to improve for the quarter, increasing 60 basis points year-over-year. This represents the seventh consecutive quarter of year-over-year gross margin increases and it reflects the hard work our teams across the world -- to drive enhanced profitability and our initiative to acquire companies and markets that have higher margins. We continue to create shareholder value with return on invested capital of 11.7%, well in excess of our weighted average cost of capital and return on working capital of nearly 28%. The third quarter was yet another quarter of strong cash flow generation as we generated almost $120 million in cash from operation. On a trailing 12-month basis, we generated $436 million in cash from operations during a period where we were growing the business. In Global Components, sales increased 6% year-over-year with growth in the Americas and Europe was partially offset by weakness in the Asia Pac [Asia-Pacific] region, reflecting difficult market conditions. Since we reported our second quarter earnings in late July, macroeconomic conditions around the world have weakened with an increasing volatility in global markets and cautiousness across our customer base. Gartner now…

Thanks, Mike. Third quarter sales of $5.2 billion were in line with our expectations and represent an increase of 11% year-over-year. Pro forma for acquisitions and excluding foreign exchange, sales were down 1% year-over-year. Our consolidated gross profit margin was 13.7%, an increase of 60 basis points year-over-year. And pro forma for acquisitions, gross profit margin was flat year-over-year. Operating expenses as a percentage of sales increased 70 basis points year-over-year. Pro forma for acquisitions and excluding foreign exchange, operating expenses declined 1% year-over-year and are flat as a percentage of sales compared to the third quarter of 2010. To assist you with your analysis, on an absolute dollar basis, the operating expense increase year-over-year was due to acquisitions, which added $76 million this quarter, a weakening dollar, which added another $15 million due to translation, and efficiency gains, which lowered expenses in the base business by $10 million. Operating income was $218 million, an increase of 10% year-over-year. Operating income as a percentage of sales was down 10 basis points year-over-year. Our effective tax rate for the quarter was 29%. And for modeling purposes, you should assume that our tax rate for the next few quarters will be between 29% and 30%. Net income was $138.3 million, an increase of 8% year-over-year. Earnings per share were $1.22 and $1.20 on a basic and diluted basis, respectively. Again, this was a record level of third quarter earnings for Arrow. We generated $119 million in cash from operations in the third quarter. And on a trailing 12-month basis, we have generated $436 million in cash from operations, all during a period where we were growing the business. Return on working capital of 27.8% is a near record third quarter level. Return on invested capital of 11.7% is well in excess of…

Thank you, Paul. Tuwanda, please open up the call for questions at this time.

[Operator Instructions] Your first question comes from the line of Brian Alexander with Raymond James. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: You're guiding Computing up 36% sequentially at the midpoint, which is in the middle of the range of normal seasonality. You're coming off 2 consecutive quarters of above-seasonal growth and some of your suppliers like EMC are guiding below. So what gives you the confidence you'll see normal seasonality in the fourth quarter on the Computing side, maybe comment on the pipeline you're seeing or conversations with the borrowers about what they're expecting for a budget flush?

Sure. I'll let Andy lead off with this and then possibly have some comments at the end of that.

Sure. Brian, so as you know, I think the budget flush in the fourth quarter is kind of unique to Arrow's value-added model and our focus on data center. And there is budget dollars to be spent and right now, we do still see that playing out to the low end of seasonality. As always, it's heavily back-end loaded but most of our input from the bar base is that there's still relative strength in the market. And we came off of a very good summer quarter in the Federal spending area and had some carry over there. So most of the indications are that it will still play out in the fourth quarter. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Okay. And then just on the Component side, how much of your below-seasonal guidance there, Paul, is really due to in-demand weakness versus customer inventory reductions to the extent you can maybe size that for your 7% sequential decline and may be additional commentary on what end markets are weaker than others.

Do you want to take a shot at that?

We're still seeing some general softness in the overall market in all the 3 regions. I think that, that's normal. And I think based on what we are seeing is -- even though the book-to-bill is improving through the month of October, it's still below 1. So -- and we're also looking at the cancellation rates and the lead times, this is all pointing towards a below-seasonal -- seasonality on a global basis.

To answer that question also around inventory balancing versus, as Peter just described, end-market demand, we surely showed a bit of an inventory hangover coming out of the second quarter. It took folks -- at the customer level, mostly at the third quarter, to get rebalanced around that. So I think that's principally behind us and I think, as Peter described, it's more so around end-market demand and choppiness in the economies that we serve.

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

Asking a question about the impact from the Thailand floods. Can you kind of address that and specifically, does it impact your hard drive business both on a sales or your Computing business on the sales that you baked into anything? And typically does this give you an opportunity, as you can get supply, an opportunity to maybe get a little bit more of a premium because you are a go-to supplier for many different OEMs and customers. If you can just assess that entire situation of Thailand and impact to your company and the outlook?

Sure. Sure, we'll take a look at this. Right now we don't see a material impact from the flooding in Thailand on our business. And really from our perspective, our offices and the warehouse have not been negatively affected. I think the biggest impact we've seen has been in some transportation delays. Compared to Japan, there really are fewer suppliers involved and a lot less parts affected but we're still monitoring it and watching it. You have to realize our hard disk drive sales are a real small portion of our total sales here at Arrow, sub-1%. So Jim, we don't see any material impact of de-strengthening. We have seen those drives increase in price but we don't think that will have a material impact on our total numbers.

Great. And then a follow-up question, a different topic on cash flow use. Your company has now kind of -- and still -- used to give cash back to shareholders. Is that something that we should expect -- the dividend, the stock buyback -- is that something we should expect as kind of a recurring thing or kind of only when the stock comes in opportunistically, or when M&A becomes less much of a pipeline filler? How should we think about the use of cash as a lot of people have asked me about that?

I'll let Paul follow-up. But in general as you can see, since 2007, we have started to put -- returning cash to our shareholders in our thinking. And we believe it is an effective use for our cash over time. I would not speculate on what we may or may not do in the future with that cash. But as you have seen, we've found a way to do both M&A opportunities on a consistent basis. And we have found ways to return cash to the shareholders on what I would say is a relatively consistent basis now. And I believe we're getting comfortable with our approach. Paul, anything to add to that?

Right. Jim, what we've been talking about for several years now and we continue believe is that the most effective way of deploying excess capitals to reinvest in the business to accelerate growth. The second choice for us would be M&A. And obviously third, returning capital to investors. And we'll continue to pursue that and try to get the right balance. We don't want to get too much of one because it could impact us negatively on the long-term strategy. So we'll continue to balance that out, we have been pretty consistent in the buyback as it relates to the fact that we want to offset that diluted impact of our equity programs, effectively convert them to cash programs, but investor -- even though the equity programs for us as the management team, and we'll continue to do that. And for sure, when we think the stock price is undervalued, we'll be opportunistic there also. And we'll continue to evaluate as we've discussed dividend also. But we're trying to get the right balance and it's a little bit more -- a little bit term focus really on the dividend side than anything else.

Your next question comes from the line of Robbie Wilkins with Goldman Sachs.

This is Robbie Wilkins on for Craig. Can you talk a little bit about pricing in the Components business and what's on the cycle and then maybe implications on gross margin?

Sure. As with any slow downturn, the markets do get more competitive. I don't see it as the same kind of situation we saw when we have the big downturn because at that time, the downturn was -- what I would say rather dramatic and it extended several quarters. And we were all looking to reduce our inventory by pretty good amounts at that time to stay in the market. So it was in the best interest of us, and it was basically in the best interest of the shareholders for not only us, but for the entire channel to reduce the price as they get the inventory out. I wouldn't say we're in that type of a situation right now. What I would say is we have seen some softening and with softening you do see prices soften a little bit. But we're not expecting the same type of downturn or the same type of pressures on margin that we have the last time.

Okay, great. And if I could ask maybe one follow-up on OpEx cuts, if you can provide a little bit more color on what actions you're taking there and then maybe any breakout by business segment or geography would be helpful.

Well, we entered the back half of last year and the first half of this year expecting on a macro basis a continued improvement in the world's economies and we've all seen how choppy it's been, and we've even seen extreme of the U.S. downgrade along the way. So in certain regions, we probably got ahead of ourselves in investing in growth and we need to slow that down a bit. In some of the regions, we're probably ahead of ourselves in investing but the fact of the matter is you think those business have a great long-term potential so we're probably going to take less actions in those areas. I'm not really going to discuss whether it's by geography or business. But we did see a decrease year-over-year in our base business and operating expense dollars in the third quarter, and we'll continue to push forward on that as we always try to be more efficient and to ensure that we can deliver a quality of service that both suppliers and customers need and require.

I think another point that we should get out there is that the Gartner and the data is still expecting some growth in Components early next year. So this whipsaw approach, without getting a better handle on which way the market is growing, is really not something we subscribed to hear. If the market does take a turn for the worse on us, we will initiate cuts just like we did the last time and we will keep up with the market to protect our profitability. But right now, we don't see an impending disaster, if you will, in the business. We do see some softening but yet, we don't see it like the last one.

Your next question comes from the line of Scott Craig with Bank of America Merrill Lynch.

Paul, a question for you on the components margins. If I look typically at what the ECS margins do in the fourth quarter versus the third quarter being up anywhere sort of 100 to -- almost 200 basis points quarter-over-quarter over the past, let's call it 5 years or so, that would imply components margins based on your EPS guidance sort of go down again in the range of 20 to 50 basis points quarter-over-quarter. Is that the right way to think about it? And second part of that is how much of the components margin decline next quarters versus if a mix, versus operating leverage versus gross margin declines et cetera? Is there a way to quantify that?

Sure, Scott. So you're right, we would expect to see a downward move and operating income percent. I think you're probably close on the low end of the range but I think the upper end of 50 bps is a bit too much around our expectations. And it really is driven principally around leverage because we expect to see less than normal seasonality generally, round numbers, lower-than-normal seasonality components. The beauty of our business is we have tremendous earnings leverage up, and that's the beautiful part of it is we also have that impact going downward. So that's really what I look at. It's not really around GP pressure, it's around, "hey, we're losing some of the top line" and the contribution margin on that whilst is pretty high. That's basically driving a contraction in the margin for the quarter.

And maybe just a follow-up, along the lines of one of the prior questions. And from an OpEx perspective, can we assume that you're not cutting as much as what you need to sort of maintain margins because you don't want to cut too deeply. Is that right way to think about it? And when do sort of make another decision on whether or not you have to cut some further expenses? Is it throughout the quarter, and as you enter into what would normally be a seasonally strong quarter in Europe in the first quarter?

Yes, it's tough to make those decisions quarter-by-quarter, right? Because one quarter could be under pressure and the next quarter, it could be rebound. So we're trying to look a little bit longer term. And that's why while we are making cuts than we are reducing expenses, we're also not prepared to take a big step down because we don't think the long-term opportunity in these businesses reflects a big step down. So we'll continue to watch the macroeconomic factors out there during the quarter and we'll continue to adjust our future thinking as we go forward. So I think to Mike's point is we don't want to be which sort of back and forth, bringing it a lot and then exiting a lot. We just want to think about the long-term nature of our business. And that means there's a couple quarters where maybe it's not as robust as we have done in the past. That's okay because we're looking for long-term payoff.

Your next question comes from the line of Matt Sheerin with Stifel, Nicolaus. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: I want to drill down a little bit more on the commentary around Components. So you talked about seeing -- it sounded like -- Peter you talked about an increase in cancellations, also sounds like orders got worse in the September quarter but it flattened out but you still have a negative book-to-bill. So I'm trying to figure out what is your sense of a bottom here? Did you sense that we're below seasonal in Q4 and things will stabilize in Q1? I mean that's what a lot of semiconductor suppliers are seeing right now but obviously nobody seems to have a lot of visibility. So what's your sense of where we are here when orders start to stabilize?

Yes, I think Matt, I'll start off with this. It really has to do with the total business and a lot of what Paul just said. Right now the impact are that the vast majority think things will start to rebound in the first quarter and even a little stronger in the second quarter. The manufacturers have a little bit more distant visibility than we do by nature of their customer base. And as they're starting to see orders pick up going into the first quarter, we view that as a relatively good news and a possible soft landing on this thing. The data that has come in from Gartner is calling for growth next year still in the business and we do use that data even though it is delayed some. And we've seen most of our customers have the same type of conversation with us that they believe this is a temporary pause. And what will happen with us is of course, we will continue to review this over the balance of the fourth quarter and continue to implement what we think is necessary. But if this is what we're looking at right now, we would view that as relatively good news, not only for Arrow, but we view it as good news for the industry. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And on the inventory situation, it wasn't down that much. I assume that some of that inventory is based on the acquisition that you did in Japan. So you could you tell us how much was from acquisitions and on a like or apples-to-apples basis, how much was inventory down? And then maybe even drill down and talk about inventory days on the Components side of the business, where it is now and where you expect it to go?

Right. I'll give you a little higher view and then I'll turn it over to Paul. As you know, we had forecasted a little bit more to come out of the inventory. The principal reason that, that did not happen is we did not see the typical end-of-quarter uplift in the business that we normally see. And as a result, we didn't get as much out as we wanted. I think it was 2% to 2.5% of the inventory went down. We would fully expect the inventory to continue to reduce going into the fourth quarter and we would expect it to reduce based on the guidance that we gave you. And Paul, you can add to the mix. The acquisitions were not that much.

Right, yes. The impact of the acquisition in Japan was less than $10 million, Matt. So not a big driver there as we look at it. And as Mike said, we thought we'd have a more robust month of September. We're confident that will trend down, the inventory will trend down and be at our target level by the end of the year, so that we're perfectly sized as we leave 2011 to see what the business is like in 2012. So yes, for sure, we're not happy with it. We thought we could deliver on a target that was aggressive and we'll get it this quarter. It's not unusual to see a one or 2 quarter lag in getting inventory out of the business. We thought we can do it in one quarter and it's going to take us through. Interestingly, when you look at inventory turns year-over-year, they're flat in the Components business, or actually they're down 10 basis points, it was 6.1 turns last year in the third quarter and we were at 6 this quarter, the way we calculate it. So it really wasn't that different per se, from where we were a year ago. But for sure we can do better as we move forward throughout the fourth quarter. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: So what's the target then? And so it will be down in line with revenue? So 7% or so?

Well, I would say at a high level, yes to that. I would also say we got to also be looking to what's going to happen in Q1. So we'll have a better feel for that as we move throughout this quarter. As to what the pace of activity will be in Q1 and then we'll have a better idea whether we're going to be bringing inventory in the month of December, but your assumption around the tracking with the sales decline might look like for this quarter. I think it's a fair assumption to start with.

Your next question comes from the line of Sherri Scribner with Deutsche Bank.

I was hoping you could give us some detail on the Components business geographically. You noted Asia being weak this quarter, which would be a bit of a surprise to me. I know in the past you've had -- you made some comments about low enhancements being issued. So I was hoping you could give some detail on what the specific weakness you saw in Asia was? And then looking forward, weakness in Europe, not hugely expected but how does Asia recover and what are you seeing in America?

Well, in the Americas, we were below seasonality. And we view that as really a weaker demand and increased customer cautiousness and that had an impact. Looking ahead to the fourth quarter, we do expect sales to be in line with seasonality, which was the flat to minus 7%, and we believe that the inventory -- at the customer levels will return to more normal. In Europe, they had a solid quarter. They were up 13% year-over-year and they were within really normal seasonality on a sequential basis. The vertical markets there, we saw good growth and we saw automotive and lighting customers increasing 5% year-over-year. We are expecting to see below normal seasonality, which I think is the driver for the seasonality for us in Components in Q4 here. And we believe that's due to macro and sovereign debt issue. We do believe there's going to be a slowdown in that market. And in Asia Pac, part of the change of the market is really Taiwan. We're very strong in China. We're not as a strong as Taiwan. So part of that is mix. We do see transportation and lighting increasing there and we've done well of outgrowing that market. We do expect the balance of the Asia market to return back to normal seasonality, which is typical minus 4% to minus 5% quarter-on-quarter. So the real linchpin for us, Sherri, in the woodshed here is really what the economic conditions in Europe look like in the fourth quarter and that's really the market.

Okay, that's helpful. And then just quickly, a question on the model, Paul. Thinking about SG&A going forward, it sounds like there's some puts and takes, some reductions potentially in workforce and cost reductions. Can you help us understand on a dollar basis how to model SG&A as we move forward?

Sure. So we think about the actions we're taking, I would put them in about a range of $20 million to $30 million right now in the business. And we're not going to be able obviously to get all of that out this quarter. But we would expect to be very close to the full quarterly run rate entering Q1.

So the reduction is a $20 million to $30 million on a quarterly basis?

No, I'm sorry, it's an annual basis.

Okay. So you would expect SG&A to be down next quarter?

I would expect that by the time we get to Q1, we'll be able to take our core expenses down by the equivalent of, let's call it $5 million to $8 million quarterly. We've already taken $10 million out as we said year-over-year in the third quarter and we'll continue to refine our cost structure as we move forward.

Your next question comes from the line of Amitabh Passi with UBS.

My first question for you, any commentary on the expectations for IT budgets heading into 2012? What are you hearing from your customers? We're starting to hear some rumblings of budgets being down next year, but would love to hear your perspective in terms of the conversations you're having with your customers.

Sure. It's really as you heard in the prepared remarks, we had a pretty good quarter with all the product lines demonstrating growth. And partially what we see, which may be a little bit different is that we've been able to enter some new markets. And we've also had some expansion of our services portfolio. We're looking forward to getting kicked off with Juniper and we've been able to increase our market penetration through matrix management. We think enterprise spending will remain relatively solid when we look forward to the fourth quarter and we believe that given that spending rate in some of the new lines that Andy and team have signed, that we won't see a decline but we do believe that our fourth quarter will be certainly in line with normal. We did talk about the fourth quarter for him being a little below what we would say the midpoint. I think it's important to note that in Andy's business, we also did an acquisition of Cross Telecom and Shared telecom. And those businesses operate just a little bit different than our core ECS business and that they don't get the 30% uplift in the fourth quarter. And that's something that in the results, why that seasonal mix looks a little odd. And after we get through this year, we'll probably have to adjust that seasonal mix given the impact of the business that we have now on the telecom side, which is a more stable, more quarterly-type approach than we see on the core ECS business. But by all indications we've had, all of our surveys that we have done in dealing with the manufacturers, most of our manufacturers are expecting a pretty solid Q4 and we actually concur with that.

Mike, I was just wondering if you had an initial sense of how 2012 may shape up with respect to IT budgets?

Yes, we still believe that it's going to be mid-single digit type growth for IT spending. We're not expecting it to dip below that at this point.

Great. And then just as a follow-up from me, any -- given all the macro-related issues in Europe, are you starting to hear or see any of your smaller customers have any credit-related issues? Is there any sort of impact there?

No, we haven't seen a change in either the credit worthiness or bank pressure on our customers nor have we really seen -- you may or may not be aware that in Europe, it's quite common to use credit insurance with customers. We haven't seen any pressure yet either on credit lines or more customers are not being credited at all. So we haven't seen any real change at this point in time.

Your next question comes from the line of William Stein with Credit Suisse. William Stein - Crédit Suisse AG, Research Division: There's some discussion earlier about book-to-bill being below 1 and a discussion of looking at the cancellation patterns and as a result guiding below normal seasonal in components. Should we think about that pattern as having troughed here? In other words, are you sensing that you're starting to see an upturn in the business or flattening out of the pace of orders? Or as we have gone through most of October already, is it still declining?

Well, in Global Components, you typically do see a decline in the fourth quarter. That's traditional seasonality that we do see. Our negative book-to-bill causes us to believe it will be a little bit more than normal seasonality. But our expectations are that it isn't a continuing decline. Remember, we spoke before and it had everything to do with what we were going to do on the cost side, what we thought was going to happen on the margin side and it is something we'll certainly watch very close going through the fourth quarter and start of evaluating what we think is happening for the first quarter and into next year. But it really is the same question that ties to all of that, right now, this is what we see and we're not panicking. So we believe we're sort of nearing the end right now. And again, if something materializes different then we'll take action later this quarter to prepare us for the first quarter. William Stein - Crédit Suisse AG, Research Division: Mike, that's helpful. And then maybe turning to the Systems business for a minute. You added Juniper recently. Can we think about growth long-term in that part of the business continuing to really be driven more by M&A or driven by this kind of organic supplier agreements that you signed?

I would say yes to both. I mean that has been our history. We are entering new markets. We're expanding the service content by which we operate in the computer business. We're expanding product lines and if there's an opportunity to continue to expand to get into new market with value-creating M&A, we'll certainly do that. We have not ever said that we would slow down M&A on either side of the business. And I think as the opportunities present themselves in either markets where we don't have the penetration we think we'd like to have or if they're in products that would help expand Arrow's overall reach in expanding the market, we'll certainly be there too. And the product expansion really helps us get involved with and learn products as a company and just so you'll have a products act and then we can follow up with something else later. William Stein - Crédit Suisse AG, Research Division: Great. And just one follow-up if I can. You haven't talked about ERP lately. If you can give us a quick update on where you are in the rollout of the global ERP update and any expected incremental savings from this point going forward?

Will, it's Paul. This coming weekend, we hit the switch and convert in Central Europe in our Components business. We're pretty excited about that because that will be -- once that's behind us, 2/3 of the way across Europe. And remember we feel that some of the big benefits are going to come out of getting Europe on a single system, where we can get better organizational structure in the back office. We can get better buying and better managed inventory. With that said, we're still going to get Southern Europe done and that we think that will be done in 2012. And we'll see those benefits about 6 months after we complete that. So we feel very good about it and I know the team's working very hard in Europe and we continue to get good information and confirmation this week from them that they're ready to go this weekend. William Stein - Crédit Suisse AG, Research Division: And is the U.S. done?

U.S. will be the last piece that we do.

Your next question comes from the line of Shawn Harrison with Longbow Research.

Just wanted to follow-up on the Asia business, particularly the commentary on Ultra Source being up sequentially this quarter. Absent seasonality, does that business look as if it has bottomed and then are you going to expect kind of growth as we move into 2012?

I think the Ultra Source business is quite dependent on the performance with the MTK chip business. We just seen the recovery in MTK business through the fourth quarter and we're expecting that will continue definitely through next year.

Okay. And then as a brief follow-up just on the M&A environment, are you seeing potential targets maybe clam up in terms of wanting to wait out maybe what seems to be a correction here in the market to sell the business? Are you still seeing the M&A environment go full steam ahead?

Well, I think the M&A environment has driven a little by the economy. Obviously, when people are selling a company, they want to get the highest valuation so they want to show the best results. And if those results dip, they like to wait and let you know it's not them but it is the market and the opportunity that's out there. So really what fluctuates during these times for the target is what their projected price is. We still do see activity in the pipeline. We really don't ever see the activity flow. I think the point for us though is if it's a good target, it has a good return and it's going to bring that value to both Arrow and expand our marketplace, we are interested. And if we get the returns to the shareholders that we want, we're interested. But I would not say at this point that we're either seeing the markets become more attractive or we're seeing them dry up. I would say, we're seeing business as usual there.

Your next question comes from the line of [ph] Steven Fox with Cross Research.

Just really quickly, some of your comments are in contrast to some of what your suppliers are saying. And one area that you haven't really touched on, I'm wondering if this is possibly the differential is the competition among distributors. Is it possible that you guys are managing better than some of your competitors, not just the large ones but the small ones in terms of inventories and sales out? Is there any competitive dynamic you can talk about there?

As far as how the other distributors manage, I think that for the most part, the industries managed fairly well. If you made it through that last downturn and you are a survivor and you came up today, I applaud that. But as far as I know, we're focusing on our management skills here at Arrow. And really I'm not qualified to say how another distributor is being managed.

But you're not seeing anything unusual in the market among distributors?

No, I'm not seeing anybody doing anything crazy if that's the question you're asking.

Yes, it is. And then just finally, just not to put words in your mouth, Mike, but it sounds like you really don't have clear evidence of a bottom but you haven't -- you've seen sort of some kind of settling out. It sounds like you touched on all the evidence you possibly could. But is there anything else specifically among cancellations or ordering patterns that you can point to that give us confidence that maybe we've seen the worst of this correction.

Well, I think right now, we've given you our guidance based off of all the information we had. And that guidance really rolled up to something that was probably better than what everyone was expecting. And we've not only gotten through the guidance with our supplier partners, we've talked to many of our major customers and we've dug into the information that is out there. I think it would be great if I could sit here and say, we're really bullish and we're back into double-digit growth. But I do not see that and I don't think that's the expectation for anybody. A lot of the suppliers are seeing requirements going into next year picking up, we've also utilized that more from a cost perspective than a market growth perspective. Because remember, we're forecasting Q4 based off of our data, what we see with incoming orders, our book-to-bill and our backlog and we compile all of that together. So at this point, we believe we've come out with the absolute best guidance we can based on all that data.

Your next question comes from the line of Brendan Furlong with Miller Tabak. Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division: Kind of following off with the previous question there, if you're taking inventory down pretty hard here in the fourth quarter like your suppliers are expecting, do you think that gets you to a point where you're done being aggressive in the inventory into the March quarter?

I'm not sure if you're aggressive term has the same definition as my aggressive term. I think Paul has said that our inventory turns last year were 6.1 turns, and we're at something like 6 based on our internal calculation, which gives you about a 10-basis point difference. I'm not looking for heroics here, I'm looking for inventory balance. And I'm looking to have our inventory balance based upon the incoming orders and the outgoing orders because that's what's important to capture the market when the market is available. And again, that's something we do on a normal course. We would've expected a little more to come out of the inventory in the third quarter as we've said but the last month of the quarter didn't materialize in a way that was previously thought and that had an impact on it. And that's why Paul made the comment, we're pretty sure we'll get it this quarter because we're able to push out and reschedule some of our incoming orders to slow the pace of what's coming in while we balance what's in here. But again, it's not our efforts to go back and again, whipsaw the manufacturers by taking out too much inventory in the fourth quarter and then we putting those orders in and asking them to FedEx everything in here. That's not our approach and that's not what we're trying to do. Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division: Okay, great. The other question I have for you is on the cycle, my assumption is we're not in the '08-'09 cycle. But do you think we're in the '03-'04 type of cycle or more of a '09, '06 type of cycle in on the components side -- I guess I'm talking about all of your businesses?

We're not looking for a downturn like the last big one, that's for sure. That's not something we see. We do believe that the market is coming to a head here. Our customers are and have been working on their inventories to get those balanced correctly. And I think if you look at the forecast for manufacturing increase next year, the forecast for GDP growth, I just saw something yesterday from Federal Reserve with something like 2.5%. If you consider that the industry typically outgrows that by 2x, you're somewhere in the 5% to 7% range for growth next year, I don't know what else we could use to cause us to drive a different conclusion than what we are drawing now.

Your next question comes from the line of Ananda Baruah with Brean Murray. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Mike or Andy, can you comment on any I guess any end markets in any of the deals that you might have seen a particular strength or particular softness this quarter relative to your expectations in service and storage? And then I have a follow-up.

Yes, this is Andy. Well, as I mentioned earlier, we did pretty good close to the Federal spending as we left September so that vertical was pretty good for us. But we still see strength in the areas that we focus on most of the time, which is the healthcare, finance and manufacturing holding up pretty good. So from our perspective, it's still occurring in a broad vertical base and that's good news for us. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: And do you see -- can you just make some comments like on general server trends, are you seeing -- seasonality aside, are you seeing any noticeable strength or weakness in I guess, in server orders, server inputs in customers in the second half of the year?

Well, just refer to our numbers. We had an 18% uptick. I think in proprietary, 18.4% growth year-over-year. And our industry-standard server, a segment grew about 6%. So the combination of the 2 would lead you to say it's still a pretty strong business for us as we enter into the fourth quarter. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: And just last one from me, can you just -- can you give us, I guess, can you talk a little bit about what some of the end market initiatives that you've put in the place are? Where you are with those now? And what we should expect for the balance of the year, heading into '12?

Are you referring on the Computing side specifically? Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Correct, yes.

Well, we continue to focus as Mike said, on the high-growth sectors, like unified communications, which we've entered into. I think another key area remains security. We're very focused on growing our Security business. And with the announcement of Juniper, I'm very excited about that announcement. That takes us into the routing, switching and security market in the United States with the data center focus. So you'll see us continue to drive towards these high-growth segments to keep the business growing profitably. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: I guess where are you now in deploying the programs? Are you, just say, in the unified communication security, are you sort of, do you have all the infrastructure in place? Do you have SMEs and stuff like that? Are you sort of propagating through your volume network for -- I guess, Juniper is probably early days in ramp?

Yes, well, unified communications now is approaching the $500 million mark. We believe we have all the infrastructure we need to carry out our goals in that. It is not uncommon for us to add new lines. The reason we add lines is as we are seeing opportunities with those lines that we don't have and we want to capture the market. So as far as spending on infrastructure growth that you would see here from any of the things that we've talked about right now would be minimal. We believe that's going to be additive sales for us now and it will be additive sales for us into the future. It's pretty early to call what we think the success rate will be with Juniper since we just announced signing the line pretty much to you guys on the phone here. It was done yesterday. So it's too early to tell what the final business plan is for that but overall, we are still bullish. And Andy's business, we think the team has done a great job of expanding for us profitably. And we would look for more of that going through 2012 .

And with no further questions, I would now like to turn the conference over to Greer Aviv for closing remarks.

Thank you, Tuwanda. 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.

Thank you for joining today's conference. That concludes the presentation. You may now disconnect and have a great day.