Vincent Keenan - Vice President of Investor Relations Richard P. Hamada - Chief Executive Officer, President, Chief Operating Officer, Director and Chairman of Global Executive Council Raymond J. Sadowski - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Assistant Secretary Philip R. Gallagher - Senior Vice President and Global President of Avnet Technology Solutions Harley Feldberg - Senior Vice President, Member of the Management Board and President of Avnet Electronics Marketing - Global

Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division Shawn M. Harrison - Longbow Research LLC Amitabh Passi - UBS Investment Bank, Research Division Scott D. Craig - BofA Merrill Lynch, Research Division Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division Sherri Scribner - Deutsche Bank AG, Research Division Craig Hettenbach - Goldman Sachs Group Inc., Research Division Brian G. Alexander - Raymond James & Associates, Inc., Research Division Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division Jim Suva - Citigroup Inc, Research Division Steven Bryant Fox - Cross Research LLC Louis R. Miscioscia - Credit Agricole Securities (USA) Inc., Research Division

Please stand by. Our presentation will now begin. I would now like to turn the floor over to Vince Keenan, Avnet's Vice President of Investor Relations.

Good afternoon, and welcome to Avnet's First Quarter Fiscal Year 2013 Business and Financial Update. If you are listening by telephone today and have not accessed the slides that accompany this presentation, please go to our website and click on the icon announcing today's event. As we provide the highlights for our first quarter fiscal year 2013, please note that in the accompanying presentation and slides, we have excluded the gain on bargain purchase associated with an acquisition and restructuring integration and other items for all periods presented. When discussing pro forma sales or organic growth, prior periods have been adjusted to include acquisitions and the impact of divestitures. In addition, when we refer to the impact of foreign currency, we mean the impact due to the change in foreign currency exchange rates when translating Avnet's non-U.S. dollar-based financial statements into U.S. dollars. And finally, when addressing working capital, return on working capital employed and return on -- I'm sorry, return on capital employed and return on working capital, the definitions are included in the non-GAAP section of our presentation. Before we get started with the presentation from Avnet management, I would like review Avnet's Safe Harbor statement. This presentation contains certain forward-looking statements which are statements addressing future financial and operating results of Avnet. Listed on this slide are several factors that could cause actual results to differ materially from those described in the forward-looking statements. More detailed information about these and other factors is set forth in Avnet's filings with the Securities and Exchange Commission. In just a few moments, Rick Hamada, Avnet's CEO, will provide Avnet's first quarter fiscal year 2013 highlights. Following Rick, Ray Sadowski, Chief Financial Officer of Avnet, will review some other financial highlights, our return on capital performance and provide second quarter fiscal 2013 guidance. At the conclusion of Ray's remarks, a Q&A will follow. Also here today to take any questions you may have related to Avnet's business operations is Phil Gallagher, President of Technology Solutions; and Harley Feldberg, President of Electronics Marketing. With that, let me introduce Mr. Rick Hamada to discuss Avnet's first quarter fiscal 2013 business highlights.

Thank you, Vince, and hello, everyone. Thank you, all, for taking the time to be with us today and for your interest in Avnet. Our Q1 results represent a disappointing setback in our short-term performance expectations. Key segments of our served markets slowed during the quarter beyond our initial expectations, leading to a dramatic impact on our bottom line results as our revenues in the higher margin Western regions declined double-digit percentages year-over-year. Our Americas region was the weakest relative to our expectations as pro forma revenue declined 14% both sequentially and year-over-year. Our EMEA region, which has been dealing with slowing economic activity for the past year experienced a fifth consecutive quarter of year-over-year revenue decline as pro forma revenue was down 8% in constant currency. As a result, enterprise revenue of $5.9 billion decreased to 8.7% year-over-year and 8.4% on a pro forma basis in constant dollars. While Q1 is typically our weakest revenue quarter each fiscal year, our sequential revenue decline was beyond normal seasonality due primarily to the unexpected double-digit percentage decline in our Americas region across both operating groups. Gross profit margin was essentially flat year-over-year, but down 37 basis points sequentially. The negative leverage from the loss of gross profit dollars due to the decline in revenue in the higher gross profit margin Western regions had a significant impact on our bottom line as operating income dollars declined 41.3% sequentially to $137 million and operating income margin of 2.3% was down 137 basis points from the June quarter. Given these developments, we increased our previously announced $40 million to $50 million of planned expense reductions and completed $90 million of annualized reductions that will positively impact our December quarter. Consistent with our portfolio management methodology, the majority of the expense actions are focused on…

Thank you, Rick, and hello, everyone. Due to the significant decline in revenue late in the quarter in both of our operating groups, our key financial performance metrics came in well below expectations. As Rick mentioned, weakness in the Western regions was a primary contributor to the below seasonal growth and significant decline in profitability. Even though we increased our cost reductions during the quarter, they could not be completed in time to have a meaningful impact on the quarter's expenses. As a result, our operating income margins declined to a level last seen during the Great Recession in fiscal 2009, and our return of capital dropped below our cost of capital. As you can see on this slide, our economic profit was negative this quarter as a positive economic profit at EM was offset by the negative results at TS. This performance is clearly not acceptable to our team and we are confident that the actions we have taken and will continue to take will restore our returns to appropriate levels. As we have clearly demonstrated in the past, we know how to adjust our business to cycles and emerge a stronger company. One of the key attributes during any slow period is our ability to generate cash. As Rick mentioned earlier, we generated $814 million of cash flow from operations over the past 12 months and during that time have invested significantly in our share repurchase program. Even with a significant investment in our own stock, our balance sheet remains strong and we have ample liquidity to manage through the current environment which is characterized by macroeconomic uncertainties. We ended the September quarter with over $1 billion of cash in the balance sheet and over $830 million of available credit from our short-term borrowing facilities. Overall, we are…

[Operator Instructions] Our first question comes from the line of Brendan Furlong with Miller Tabak. Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division: A couple of questions. On the TS side, your guidance for the December quarter, it looks like you're guiding more or less seasonal if you plugged in the midpoint of guidance. Obviously, that's off of a less-than-seasonal September quarter, but what are the risks of guiding for kind of a seasonal December quarter here given what's going on out there?

This is Rick. I'll take a stab to make sure we're on the same page with the actual numbers and then I'll ask Phil or Ray to jump in. The plus 17%, which is -- that is, think of that as the organic sequential growth rate expected, we believe is below a typical seasonality that we would see for a year-end quarter. So I guess I'm just trying to challenge the assumption that it's a midpoint or regular seasonality there. And maybe the fact that it maybe escaping you is the fact that there's a significant chunk of revenue expected now for our recent Magirus acquisition as part of the reported number. Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division: Yes, sorry. My bad. Dealing with Magirus, sorry. Have you disclosed what the Magirus revenue is on, on a quarterly basis?

No, I think we referred to the business as a roughly $500 million annualized business at the time of the transaction.

This is Philip. A typical seasonality for us is plus 20% to plus 25%. So coming into plus 17 we is think conservative, and based on what we saw in the June and September quarter closes, we felt that was about the right guidance to go with, but we're still expecting a dividend year-end. It'll pick up with the capital expenditures which is tough to forecast much beyond that at this point in time. Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division: Right, that was -- I meant to say, my mistake , dealing with Magirus. And then I guess one on the EM side, do you think that EM Asia will do a catch-up of what's going on in the U.S. and European markets? In the December quarter, it was well ahead of expected. And I see all your -- the Asia distributor as a prime mover certainly. They certainly had a very strong quarter, too, but is there a chance that then we get that back in the December and March quarters?

It's Harley. I would categorize what we saw in Asia as above what our expectation was when we set the guidance, but not particularly inconsistent with normal seasonality for that region. I actually saw the announcement as well from one of the larger Asian distributors earlier, and their sequential action was identical to ours, so it looks pretty consistent with what's happening in that region. So our guidance expectation for December looks for Asia to be about normal seasonality, which is typically flat to down a little bit in the December quarter. Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division: Okay, and if I could add one, I'd sneak one more in, if I can. I'll be cheeky. On the gross margin front, total corporate revenue below seasonal on both sides of the business, do you expect a similar hit to gross margins as we saw in the September quarter or what should we see there?

Yes, Brendan, good question there. I would tell you that the way we factored into our guidance was slightly below the normal seasonality. We have put that factor into our equation and it's reflected in our overall guidance.

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

Just wanted to, I guess, touch on EM in terms of where we're at in the quarter. It seems the guidance implies maybe a stability in terms of the revenue run rate on an organic basis. If you could just kind of walk through where the book-to-bill you think will shake out for October, kind of how the daily sales run rates are changing and then just what were the products you're walking away from in Latin America as well.

Shawn, it's Harley. So let me give you a little bit more data than you asked because I'm sure it'll come up after you. Our book-to-bill as in the September quarter were below parity, as I believe we said in the release. And we ended up below 1 in all regions actually which is fairly unusual for us. When we look forward and when we look at the small amount of data that we have so far in October, and please keep in mind it's 3 weeks' data, in a quarter, by the way, that typically is a bit unpredictable as we get into the holidays in the latter part of December, the book-to-bill has returned again in all regions conversely to what I said in September to be positive. So again, I caution these 3 weeks of data. But then it's an interesting contrast to us as we look at the limited amount of data looking into the December numbers.

And then just what are you walking away from in Latin America?

Oh, I'm sorry. In Latin America, the detail on what was in Rick's comments is what we call the commercial component business that principally came to us via the Bell acquisition. So there are some drive business, some memory module type of business. That type of commercial component business is what we're walking away from.

And then just, I guess one more follow-up on EM. Do you think the market itself in the Americas was down as much as you were sequentially? Or were there components within the EM business that maybe underperformed the general market?

Thank you for the question by the way because it's and important one. When we look at the number, we tend to parse it 2 ways. As you know, we have essentially 2 businesses in America. We have a, what I call our legacy components business and our embedded business. And the embedded business has 2 elements in it, the previously mentioned commercial component volume business and then an OEM embedded business. Our legacy component business in America was down more than what would be normal seasonality due to the, I think Rick described in his opening remarks, around customer behavior, customer conservatism. But a good portion of the overall reduction is really an accelerated reduction in the embedded business in the area we discussed a moment ago, which was high single-digit reduction. But that high reduction and that piece of the embedded business, I believe does make the Americas' overall number look like it decreased at a rate a bit higher than what the market probably overall did.

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

I guess my first question, Rick, now that you've had some time to reflect on the September quarter, how do you -- can you help us understand what you think went wrong? How do you sort of reassure investors that the model is more resilient than sort of the lapse on we saw from June to September because your performance was probably one of the weakest we've seen over the past several years?

Yes, fair point. Probably the same reason I used the term disappointed setback, Amitabh. So I would tell you that tracking the revenue declines with so much back weighting on the computer business in particular. Now we've seen that twice in a row. I'd say once can be an anomaly and at 2 times now, you've got to call a trend. There's something's different here. And again, you can see that factored into our December guidance. The margin deterioration, because of the slowdown in the west, was a little bit tougher to discern and one of the reasons was, for example, our components business in the Americas, if we looked at the inter-quarter year-on-year, in other words let's look at July versus year-ago July, August year-ago August, September year-ago August, it actually got worse as the quarter went on. So the -- it was deteriorating during the quarter there. So as you bring in the early results in the first few weeks of the quarter, which there really wasn't a flashing red light on the dashboard that would've indicated we've got something else to address overall. However, as you could also see based on the fact that we actually came in with $90 million of expense actions, that is -- even though, we're obviously going to be conservative when we set expectations for $40 million to $50 million, I would tell you that as we actually got into the process of looking where the gaps were in our portfolio, where the returns were low, where the revenue decreases were having the most impact and that's where we target our resource actions, obviously we factored some of that knowledge during the quarter as we felt -- saw things slow down that contributed to bringing in a much stronger expense reduction number than even we had talked about on August 8, I think, our call was. So all these lessons that can be learned from this scenario, but there was a certain amount of sort of I guess accelerating deterioration that we just didn't quite catch up with.

I appreciate it. And then just for my follow-up, for Phil. Phil, it looks like TS came in about $200 million lighter than your original expectations. Can you just help us understand between your 4 major areas, server, storage, networking, software, where you saw the biggest weakness and how do you see trends going into the December quarter?

Yes, no problem. Thank you. Basically, you just look at those categories you just talked about. Storage, if you look at that, I mean year-on-year, we're actually up into the double-digit range. Yes, that was very positive. We saw increases in network and security, positive as well when we captured that -- the technologies that play in that space. Virtualization was also up, okay. So those are the categories that we saw positive trend continued through the quarter. Where we saw the biggest dip was in servers, industry-standard, global was actually up close to double-digit and the balance was down, okay? So servers overall is where we saw the biggest drop. The one other category in technology that we track and had in our portfolio that some others don't is what we call the PC components, okay? If you look at the drives and the processors and the bulk of that's in Europe and Asia. For me, that was down very significantly. Okay, that was the steepest drop that we saw, that was in PC components arena.

And then into the December quarter?

Well, still tough to say and part of the drop for us was what projects didn't come through. I'm sure that's a question that someone's going to ask here very shortly, is whether we see at the end of the quarter, we should see the sales cycles continuing to get delayed and being more evaluated. As we sit right now it's really tough to call how it's going to go through the quarter. We're expecting what we just talked about, the 17% increase. But storage continues to be positive, a bright light for us. Our virtualization continues to be good. Too soon to call the server market right now and we do expect a bit of a pop-up in PC components, but again, too early to really call. Right now I'm safe to say storage and virtualization looks right.

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

Ray, this is a question for you on the margin side. Can you maybe take us through EM and TS? I know there was a lot of moving parts going on in the quarter we just finished. But if you look at the guidance, you're looking for a pretty big improvement in the margins of either and or both of those businesses. So can you take us through some of the things that are pushing and pulling on that, whether it's geo mix or product mix, some of the restructuring coming through and just help us understand how we get to the improvement in margins?

Sure. So I guess a couple of different things. One, as you would typically expect on a sequential trend, you would see TS margins typically moving up a little bit just based upon the volume of business. So you'll see there gross profit margin tick up, as well as our operating income margin move up, just from that seasonal effect of their business overall. So that's, I guess, probably the biggest factor to look at it from the Avnet level overall. We do expect at this stage from a gross profit margin perspective, for the most part no further deterioration in margins in the EMEA-- I'm sorry, in the key EM organization. So planning flattish type margins from that perspective going forward from the gross margin perspective. And then, finally, when you take into account the expense reductions, so fairly, as Rick mentioned in his opening remarks, took out $90 million of expenses on an annualized basis. A little bit of that already reflected in our numbers, roughly 20%. We had the balance of that all being reflected in Q2. So when you factor in all of those, and I guess I'll say one other thing from an expense perspective, at least going forward sequentially, you will recall that typically, we have a fairly significantly move-up in sequential expenses in the first quarter related to our stock compensation program. Well, that will come back down again as is typically the case in the second quarter. So when you factor in that item, plus the expense reductions, it gets us to our overall expectation from a profitability and margin perspectives.

Our next question comes from the line of Ananda Baruah with Brean Capital. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: I mean, I guess another one on the margins. I guess -- what -- how should we envision the path back to sort of, I guess, margins where they were a year ago to start? I guess, if we get to normal seasonality, say, just for the sake of argument, in the first half of next year, with the cost reductions that you've implemented and that you're looking at doing in addition, will that -- is that enough to get us back, sort of all things equal on mix or is it going to take something more than that?

Yes, Ananda, this is Rick. To make sure I understand the premise here, if you're saying that calendar 2013 starts off with "normalized sequential seasonality" for both our businesses, with the expense actions done, the ones being contemplated this quarter, that would put us on a trajectory to get back and cross over, hopefully, back to full recovery on the margins at both businesses by the fourth quarter. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: By the fourth -- by the June quarter, so got it. So if we do normal seasonality in March and June in TS and EM, you can have margins back north of 3%, overall margins back north 3% by then?

I -- that, again, the biggest part of that assumption is "normal seasonality". Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Understood, but just for a baseline assumption. Okay, and then just to follow-up if I could is, are you seeing -- could you talk a little bit about the pricing environment and sort of pricing both at -- from the vendor level, as well as what you saw in the channel? And do you think that in a softer environment like this, vendors will have to change their programs with you guys over the next couple of quarters?

I don't know, maybe comments on components around the turns business maybe or...

Ananda, Harley. Could you give me a little more on that question? I'm not sure I understood your last lines. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Yes, sorry about that, guys. And I mean, I'd love to hear you have both sides on this. As I think -- I was actually asking more specifically to TS since it was soft but the question is, so what are you seeing from pricing in general and I guess pricing from the vendors, as well as pricing what's going on -- going to customer and the channel? And given the environment is softer, do you think that vendors may adjust sort of their programs with you guys over the next couple of quarters?

Yes, Ananda, again this is Rick. I'll take a stab and Phil, if you want to add a few things as well. So Ananda, the gross margin issue that we talked about in the Western regions was less pronounced at TS than EM. And primarily, I'd tell you there's a function of the fact of when you're short in revenues, you don't optimize your profitability with that business, right? The conversations with the suppliers regarding the appropriate amount of incentives and all the support for our -- whether our technical resources, our sales resources, our dedicated resources et cetera, those are constant conversations that are always taking place. And obviously, we have a keen interest in making sure that those are aligned to the current market realities in any given cycle, right? So other than that, Phil, I'm not sure if any particular behavior change or any other trend is going on with the suppliers or customers.

Nothing that you don't see naturally in cycles like this. There's always natural margin pressure in the system from the suppliers and the customers. But if you look over the last 8 quarters, our margins overall stabilized typically from 2 years ago. So I would say we're holding fast to keep the margin stable. And it's a balancing act as you want to drive sales and the market gets competitive, but there's no wholesale changes really from the supplier side that we've seen.

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

Ray, a question for you. Thinking about the SG&A, there's a lot of puts and takes with the acquisitions coming on and then compensation expense that usually shows up in the first quarter. Can you give us a sense of an a dollar basis if SG&A is going to be up to include the acquisitions or flat or where do you expect that to be?

All right. So if we walk through the expenses, what we expect expenses going forward to Q2 to be roughly flat to down slightly. On the increase sequentially, you have 2 items, one is FX and the other is currency. The impact of -- I'm sorry, that's twice to that, I apologize. FX and M&A -- that's my second time I've done that, so I apologize. So 2 items pulling it up, one is FX and one is M&A. And roughly speaking, sequentially, the impact of those 2 items is roughly $28 million, $29 million, all right? And so if you look at starting from that perspective and then coming down from there, you essentially have, I'll say, 2 items -- 3 items in total. One is compensation expense, equity compensation expense, coming down and that'll come down by roughly $9 million. And then you have a combination of all of our expense reductions and everything else bringing us down to what we think will be relatively flattish to down slightly sequential expenses.

Okay, great. That's very helpful. And then just a question on TS EMEA, I think you said this is the ninth quarter of revenue declines in that segment or maybe you said seventh quarter of negative growth in that segment. It seems like a segment that's been struggling a while. Are there some significant changes that need to be done there that haven't been done? Was that part of your restructuring? Obviously, Magirus will help on the revenue growth this quarter, but what else needs to be done there to fix that?

Yes, so you got that right. It's been several quarters of decline. Now some of that we need to keep in mind was following the post Bell, okay, acquisition as well and we've talked about that prior as we continue to deselect revenue, both are to be in the process arena I just talked about we’re getting out of Italy about a year ago. So some of this is very conscious, okay, from the standpoint of, again, revenue selection, okay, and trying to drive our operating margins up, which we saw good progress, very good progress in the last 4 quarters prior to this September quarter. So Graeme and the team have been managing the expenses. They had significant reductions last quarter, as well as the quarter before and we're looking at further reduction this quarter prior to the Magirus synergies coming in. So we're really managing the overall portfolio. A lot of the decline this past quarter in Europe is obviously tied, some to macro, but also we have a heavy weight toward FDC [ph] components business interprocesses and drives, which really doesn't fall into enterprise but have changed Graeme's business and that was down in the 30% to 40% range from a year ago, okay? So that also exasperates it. So when you start to break it down by technology and commodity, it starts to look much better, but we still have [Audio Gap].

Our next question comes from the line of Craig Hettenbach with Goldman Sachs.

Looking at it from a different angle, the shortfall that you saw in the quarter at the end, can you talk about was that broad-based or were there any particular segments that came under more pressure late in the quarter?

And just going back to the commodity question earlier, the one thing I didn't mention was, we saw good growth in services, which I didn't acknowledge that, and software held on its own relative to the marketplace, which are 2 areas of focus for us moving forward. As far as the dropoff, yes, I'd love to say it was a certain segment, a certain vertical. It really was across the board but predominantly in the larger, bigger deals, okay? They'd come in as the quarter closed out, they just got reevaluated, held, what have you, but it's very difficult to pinpoint it to an exact vertical, just pretty much across the board. Customer behavior just pushing the deals out or putting them on hold or reevaluating them, and they predominantly were in the larger deals.

Okay. And then if I could follow up, Rick, after the $90 million cost cuts, at this point, when you're looking for more to take out, is it more of a fine-tuning or can you help kind of size it up a little bit in terms of what other actions you can take?

Yes, so, Craig, I would tell you that there's -- we haven't quantified anything at this particular point. I do not anticipate it's going to be anywhere close to the same magnitude that we've taken in September. It is adjusting to the continued developments and conditions that we're experiencing working with right now. And the eye is towards making sure that we take a look at that plan for the rest of the fiscal year, and very much focused on recovering our operating margin at both groups as understanding their trajectories, taking a look at the heat map as to where the revenue gaps or performance declines are, and that's where we'll continue to focus and do things. However, I just don't think it's going to be up anywhere the magnitude as the step we took in the September quarter.

Our next question comes from the line -- from Brian Alexander with Raymond James. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Ray, based on your comment before that the expenses will be flat to down slightly, I think I heard in the December quarter on a sequential basis, it would imply that gross margins are also basically flattish sequentially to get to your operating margin, I think, of about 3% despite mix shifting toward TS in a pretty major way, and that seems counter to typical seasonality. So can you just go back over those comments? I want to make I understood that correctly.

Sure. I think you understood the comments so if you're looking at the gross profit margin, I would agree that we would expect gross profit margin to essentially be flattish. And a couple of things, one on TS, you would typically see some improvement in its margins, and as I mentioned, earlier, we're not expecting any deterioration in the GM gross profit margins, maybe a slight uptick. And again, mix of business is a little bit different than it was a year ago. So keep in mind that we've seen, as an example within EM, you've seen some strengths in Asia versus some weakness in the Americas. So factoring all of that in, you get to sequentially what we have forecast that it'd be roughly flattish gross profit margins. So the Math you have is essentially correct. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Okay. And then maybe for Phil, just on the revenue weakness. I think the Americas down 18%, Europe down 12% year-over-year pro forma. Clearly, the market's weak, but I don't think it's that weak and we'll see what your competitor says next week. But just based on your best guess, how much of that softness do you think is market-driven versus Avnet-specific? And within that, how much would you call out to maybe product mix being disadvantaged versus execution or competitiveness?

Yes, it's tough to pinpoint, Brian. It's a good question and we're certainly studying that and we're also looking for some prior reports that have come out recent -- in the last several days to the week. And we're lining up pretty well with those, which is positive. There is some product mix. I mean, if you look at the disparity -- and it's tough, because I don't live there, okay, in our competitors' house. So I don't know all that they have and all that they're doing but there is a pretty significant geographic mix right now that's different, okay, that were in Latin America and were in Asia Pacific. And even across Europe, there's different presence across Europe by country and different strength by country. And if you look at technology, where in Europe we have been traditionally not very strong with virtualization, we've not had, across Europe, a very strong storage portfolio and that has certainly hurt some of our growth there versus some of our competition. Now that's resolved, okay, with the Magirus acquisition it's going to bring us very good strength in both storage, EMC in particular, Cisco and VMware that we've not had. So we think we're positioning ourselves to better compete from a technology standpoint. The last area are around, if you will, from a commodity or product portfolio difference, is and I alluded to it multiple times today, is the -- what we call the PC components and I'll give more details on that later. But that's, in rough and tough terms, that's somewhere in any one region between 8% and 10% of the revenue. We're upwards of 16% of the revenue and that dips down 30% or 40% on a year-on-year, it does have a pretty significant impact on the overall numbers. That all said, we track by supplier and we're getting that data in daily and we're pressing the team. We've not seen any anomalies of significance with any of those suppliers yet. We'll continue to gather that data, and what do we do, we're going to take corrective action to resolve it. In the end, as far as execution goes on way on that and we need to fix the top line, and we're balancing that with margins that's the question earlier and we don't want to forsake the margin that we've been able to hold up. Yes, gross margin are just driving revenue. So that's always the tricky balancing act when you get into markets like this. Hopefully I’ve answered your question. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Yes. Just one quick final one for Ray again. The DSOs ticked up about 3 days sequentially and 5 days year-over-year, and I'm just wondering what drove that, given that I think the quarter weakened as it progressed in both segments?

Yes, I don't know of anything specific that would've driven that. So you obviously have some normal mix of business, and I just don't know whether we've extended some terms in the short term in this kind of environment, which we don't do a lot of, but we do occasionally. And that might cause a little bit of this extension of days. Or just the one thing we focus an awful lot on, which is delinquencies, and from that perspective, no issues there at all, so delinquencies and, therefore, overall bad debt type situation is still very, very strong.

Our next question comes from the line of Matt Sheerin with Stifel, Nicolaus. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: So I do have a couple of questions. One is, you talked several times about the PC components business being a drag and I know that when you did the Bell Micro acquisition 2 or 3 years ago, Ray was saying that the jury was still out at long-term in terms of how that PC part of the business would fit. And it looks like at this stage, it doesn't look like a very attractive business. It's not that complementary to the rest of your focus on enterprise, data center on the competing side. So have you looked at divesting at least part or all of it? I know you're doing some moves in Brazil, but that's fairly small. So have you looked at that? And take us through the process. If you did, how easy would it be or difficult would it be to extract that business from your operations?

You might want to refer that, if it's okay, to Rick as it crosses both operating groups. Some of that business is still on Harley's and...

Yes, Matt, and I'll add some historical perspective as well because we have had segments of this business which have been provided an opportunity for us to create long-term returns, consistent with our expectations. And part of the evaluation -- remember, we had, for example, preexisting relationship with AMD for many years and subsequent to the Bell deal, we brought over, I think, the number that was advertised at the time, roughly $1 billion HDD business, there was a significant portion of that, let's call it 25%, that was in the embedded space going to OEM customers principally also with Integrated Systems we're very excited about. And then that evaluation I think Ray was referring to was, hey, on the remaining $600 million, $700 million here, we are obviously going to make judgments over time. What can meet the test of being able to sustain our returns through cycles long-term et cetera? That evaluation continues. We will continue to keep you updated as it goes, but as far as a major divestiture move, what we're going to try to package up all the pre-Bell or former Bell activities and then make a significant move and a divestiture along those ways, that I don't think that's in the card for us. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay, fair enough. And what was the revenue run rate of those op or PC component operations in Latin America that you're exiting? And I know that's on Harley's side, right?

So Harley, a revenue number for Eddie's, when he exited from...?

I would annualize that to -- at about $200 million. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So and that revenue is going to go away on a quarterly run rate in the December quarter. So is that part of a down 6% guide?

Yes, it is. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay, and then, just a last question, again for you, Harley, on the components business, I know the mix certainly worked against you in gross margin. But given that a lot of the business given very short lead times here we're seeing a lot of jumpball, if you will, type of orders from customers. So wouldn't you be seeing some pricing pressure. I've talked to several competitors that are seeing pricing pressure on deals, some of them have pointed to Avnet and your other competitors as being competitive there. So how much of that is playing into it and how much are you being disciplined in terms of walking away from those deals?

Yes, great question, Matt. When you think of the gross margin, the sequential gross margin deterioration for EM, the way I would think about that is, a typical quarter for us because of mix would be down 15, 20 basis points because of the mix shifts. So that occurred, and as you heard us talk earlier, that occurred to a greater degree than we've seen in a number of years. So the significant majority of our sequential gross margin deterioration was clearly just a mathematical calculation driven by regional mix. With that said, I believe your assertion is correct. There's clearly a degree of our gross margin deterioration, albeit a smaller part, that I would call pricing pressure, really resulting from a stagnant low growth environment. I think your theory is very valid. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: And going forward, are you taking a more disciplined approach or are you just down -- rightsizing the cost structure so that you can go after that business and lower gross margin?

Well, as I'm sure you would agree, it's always a fine balance. There are pieces of business as we illustrated by some of the stuff that we walked away from, that's not strategic to us. So we wouldn't chase low-margin business just for top line revenue. But in a challenged market, of course, we're going to compete effectively on our core business, and I believe that competition, that increased level of competition will likely continue until we start to see some relief in the broad industrial market.

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

If I could ask a question on the rebates, the topic of rebates. In the last recession, I think the rebates had to be reset, and can you just let us know where all the rebates reset to give you the same financial benefit going forward or lesser or more, and just discuss the rebate situation that impacted you through this demand shortfall.

This is Rick, and I do remember 2008 as well. I think I tried to characterize in our earlier; comments on this that certainly, when you don't make your revenue targets, there are certainly some impacts. However, the gross margin deterioration we referred to in the Western Regions was more muted at TS versus EM. And it was really a function of not achieving those revenue targets. However, it wasn't a major rebate story like '08 were there were a bunch of cliff vested types of incentives that you either get 0 or 100% or 0 and some of the factors that created that debacle back in, if I remember correctly, I think it was the March quarter of 2008. So the R word really isn't a major part of the story here. Again, the R word that applies is revenue, it was the shortfall in revenue that really drove the issue here. There really wasn't a sub story regarding the rebates. And again, as I indicated, we are in constant dialogue and conversation with our suppliers in all cycles, in all markets to try to keep the incentives aligned not only for us, but also for the entire ecosystem in the channel to accomplish the goals that they want to accomplish.

Right. And then as a follow-up, though, if demand remains at somewhat of a tepid level, the question is, are you able to still economically get the rebates that traditionally were based on a higher volume level?

Well, we do work with all of our suppliers and they have a vested interest in making sure that their incentives are aligned to be able to encourage the channel to continue to promote and make investments to help them achieve what they want to in the marketplace.

So it sounds like they've been reset to a more reasonable volume level then?

Well, yes they're competitive, they're staying in touch with the marketplace here and working to modify as they go based again on the adjustments to their plans.

Our next question comes from the line of Steven Fox with Cross Research.

Just one for me. Going back over the TS guidance, I guess if I back out Magirus, you're looking at about 1/2 the rate roughly of sequential growth off of a lower base than you would've expected. I'm still trying to understand how you're getting to that number. Is there anything that's going on relative to some of the pushouts in terms of booking those in the first month of the quarter? Is there anything else in terms of the mix that we should consider like, for example, the PC component business flattening out or actually getting better off these bad numbers? Can you just sort of dive into that a little bit more, that would be great.

Yes, Steve, this is Rick. Let me take a stab make sure I understood question and give you some perspective and let me know if we hit the mark. So think you made a claim in it that the sequential revenue -- the guidance was something like 1/2 normal seasonality. And again, what we're saying it's 17% when normal, I think, for us would be between 20% to 30%, somewhere around 25%, okay?

But I'm backing out Magirus. So I'm looking at [indiscernible]

17 is the organic rate. So Magirus is actually it's higher. One other factor for long-term Avnet watchers, if you want to check your data sheets is that our fiscal calendar will end on December 29, Ray, right? So December 31 is a Monday and that will actually be the first fiscal day of our Q3. So we're back in that time of the Avnet fiscal calendar, where there may be just a little bit of spillover from what would traditionally be Q2 revenue into Q3 and that had a very minor impact on our expectations. But as you can imagine, we have gone through all the expectations to produce this guidance with a fine tooth comb.

So is there anything in particular that you're hearing from the customers because you just went through a quarter and you even described the last couple of quarters as being disappointing that makes you think you're not going to have a third month of this fiscal quarter that is equally disappointing. As you said, it's so much bigger than prior months.

Yes, Steve, I think we're trying to get a little smarter. As I said, when you see it happen once, it's anomaly; when you see it happen twice, you have a trend. And we've had now the June or September quarters, we've had much more muted quarter end closes from an activity and business level that we normally would've expected and that has absolutely adjusted our expectations that we're laying out here. However, as Philip pointed out, we do still expect a nice sequential revenue increase in this space due to the general seasonal factor of year end and what some will typically call the budget flush.

Our next question comes from the line of Lou Miscioscia with CLSA. Louis R. Miscioscia - Credit Agricole Securities (USA) Inc., Research Division: Okay, great. On the TS side, you mentioned the proprietary servers were down, could you mention how much they were down and maybe how much the industry standard were above? And then is the mix shifted enough that maybe it's starting to stabilize business because the proprietaries will probably be down for a very long time on a year-over-year basis given the next number of years.

This is Phil. I'll give you a range. Industry standard servers were up in the 10% to 15% range and the proprietary is down, let's say, in the 20% range roughly. Louis R. Miscioscia - Credit Agricole Securities (USA) Inc., Research Division: And then just how about the mix of the size in comparison to entire TS and whatever kind of proportion you want to give us?

As relative to the TS, I mean, if you look at the servers that as I mentioned, earlier, was definitely the area that we had the biggest shortcoming to the numbers that we needed to achieve. If you could do the math and get all the numbers by technology, it was clearly the server category for us that was the softest and pretty much in line with the balance of our overall performance. Louis R. Miscioscia - Credit Agricole Securities (USA) Inc., Research Division: I guess what I'm trying to get at is the drag going to start to slow because of the size of proprietary is low enough? Or is it -- that's not really the case yet?

It's certainly declining, but not the case yet. Louis R. Miscioscia - Credit Agricole Securities (USA) Inc., Research Division: Okay. And then just last question, any new logos to the TS group that might help besides obviously the acquisition in Europe?

Any new what, Louis, is it M&A or what? Louis R. Miscioscia - Credit Agricole Securities (USA) Inc., Research Division: No, new levels being any new big OEMs that you signed up recently that might help to calendar 2013?

There are no new signings, but with the Magirus acquisition, we are expanding our relationship with Cisco into Europe which is we're very excited about.

And further the strengthening of EMC and VMware.

The other area I would just add to that will be if you look at some of the M&A we've been doing most recently -- this is Phil with TS, outside of Magirus, which brings us a whole other value outside of the equation in Europe which we're very excited about during the last 4 or 5 acquisitions we've done between Ascendant, most recently Braveheart, Canvas, these are all new brands and opportunities we have to further incrementally grow the business both in the Americas as well in Europe, some of those have crisis in Europe as well. So not necessarily new suppliers but there's certainly new opportunities we have to leverage as we get into 2013.

Gentlemen, there are no further questions at this time.

Thank you for participating in our earnings call today. As we conclude, we will scroll through the non-GAAP to GAAP reconciliation of results presented during our presentation, along with a further description of certain charges that are excluded from our non-GAAP results. This entire slide presentation including the GAAP financial reconciliations, can be accessed in downloadable PDF format at our website under the Quarterly Results section. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.