Vincent Keenan - Vice President of Investor Relations Richard P. Hamada - Chairman of Executive Board, Chief Executive Officer, Chairman of Global Executive Council and Director Kevin Moriarty - Chief Financial Officer, Senior Vice President, Controller, Assistant Secretary and Member of Executive Board Harley Feldberg - Corporate Vice President, Member of Executive Board and President of Avnet Electronics Marketing Global Philip R. Gallagher - Senior Vice President, Member of Executive Board and Global President of Avnet Technology Solutions

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

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

Good afternoon, and welcome to Avnet's Third Quarter Fiscal Year 2013 Business and Financial Update. If you're 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 third quarter fiscal year 2013, please note that in the accompanying presentation and slides, we have excluded restructuring, integration and other items as well as the gain on bargain purchase associated with an acquisition and certain income tax adjustments 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 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 to 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 are 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 third quarter fiscal year 2013 highlights. Following Rick, our Chief Financial Officer, Kevin Moriarty, will review some additional financial highlights, our return on capital performance and provide fourth quarter fiscal 2013 guidance. At the conclusion of Kevin's remarks, a Q&A will follow. Also here today to take any questions you may have related to Avnet's business operations is Ray Sadowski, Avnet's Chief Administrative Officer; 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 third 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. As our team continue to navigate through an uneven economic recovery, we are pleased that our overall third quarter top and bottom line results came in consistent with our expectations. The economic recovery that has driven sequential growth rates closer to normal seasonal patterns at the global level continues to vary by region and operating group without, as of yet, clearly discernible multi-quarter trends. If you look at our TS business after a very weak September quarter, the Americas region has clearly been stronger than EMEA over the past 2 quarters. While at EM, our EMEA region experienced typical seasonal growth in the March quarter, while the Americas was weaker than normal. As a result, Avnet revenue declined 6% sequentially to $6.3 billion, which was in line with our normal enterprise seasonality for the second consecutive quarter. On a year-over-year basis, reported revenue was roughly flat, and pro forma revenue declined 4.4% in constant currency, primarily due to the slower rate of recovery in our Western regions. Gross profit margin increased sequentially at both EM and TS, driving consolidated gross profit margins up 53 basis points. However, gross profit decreased $12 million or 1.6% sequentially due to the decline in sales typically experienced as a result of the normal seasonal trends at Technology Solutions. On a year-over-year basis, both gross profit and gross profit margin were essentially flat as an improvement at TS was offset by a decline at EM. The impact of the seasonal operating income declined at TS, partially offset by the increase at EM, drove operating income down 12% sequentially to $195 million, and operating income margin decreased 19 basis points to 3.1%.…

Thank you, Rick, and hello, everyone. Despite 2 quarters of near seasonal growth at the enterprise level, the uneven recovery by region has resulted in continued negative year-over-year pro forma growth in our higher-margin Western regions. Just as a point of reference, if you combine our 2 groups, year-over-year pro forma revenue has declined in all 3 quarters of fiscal 2013 in the Western regions as the Americas and EMEA regions were down 10% and 7%, respectively, in the March quarter. Even with these challenges, our team has done an effective job of reacting to the choppy growth and delivered on our interim expectations with a focus on accelerating progress towards our long-term targets. Disciplined working capital management and consistent profitability combined to drive our 12-month cash flow from operations to $689 million, well above historic levels. Working capital, excluding acquisitions and the translation impact of current changes in foreign currency exchange rates, is down 3.1%, primarily due to a 10.2% organic decline in inventory even as revenues remain flat with the year-ago quarter. This cash flow generation has allowed us to make investments in value-creating M&A and our stock without negatively impacting our strong balance sheet and liquidity. Through the first 9 months of fiscal 2013, we have invested $244 million in strategic acquisitions that have expanded our capabilities and competitive position in all 3 regions. In addition, we have returned $207 million to shareholders through our stock repurchase program and still have approximately $225 million remaining of the $750 million authorization. Now let's turn to our return on capital and economic profit performance. As you can see from the chart, both metrics are down sequentially and year-over-year primarily due to lower operating income in our higher-margin Western regions, which, as we have noted, have been dealing with a…

[Operator Instructions] Our first question comes from the line of Steven Fox with Cross Research.

Just one big picture question just looking at the charges you just discussed. So this year now, you're talking about $140 million in charges. The margins, particular on the EM side, still remained relatively depressed, and the revenue base was sort of -- I guess I would call it sort of flattish to maybe marginally a little bit better versus a year ago on an organic basis. And also, your returns on invested capital don't seem too terrible. So what exactly are the charges accomplishing in the last 6 months, what are the new ones aimed at? And why is any of this not related to maybe some other secular pressures that we're not discussing yet? I know it's a big question, but any help will be appreciated.

Yes, Steve, this is Rick. I'll start and maybe ask Kevin or Harley or Phil to chip in. It is a big question overall. If you try to separate how much of the expense actions are due to what's going on in the macro versus what's going on in execution or performance in one of our businesses, how much of it is incremental actions due to underperforming new acquisitions, et cetera, it's very, very difficult to try to break that out overall. I would tell you at the very high level, so our strategy has been -- we've talked about these interim goals and progress back to certain performance characteristics. And most often, in the last few quarters, we've been mentioning a certain operating margin return profile for both operating groups in a certain timeframe. And what we do is we assess and drive through each quarter. Everything we're learning, we're making decisions and making changes as the quarters unfold. We keep those longer-term goals in mind to cross over and get back on track for the LRPT. So it's really an ongoing continuous effort. And what we're reporting on right now, as an example, the $40 million that will be done by the end of the fourth quarter, there's been a substantial part of that already accomplished actually through the third quarter. We just didn't want to get into breaking out between those 2 quarters as we go. So think of it as an ongoing continuous process where we're constantly trying to manage and adjust to the realities of the current market conditions, but at the same time, if I walk that fine line, to maintain our service levels with our existing customers and not stress capacity to the point that we're unable to respond to any return to positive momentum. And hopefully, over the years and quarters of the past, we've demonstrated a clear capability of trying to manage that pretty much down the middle of the fairway and working to balance all those competing issues overall and understanding what we would normally expect in a return to positive momentum. Those -- all those factors impact and affect the type of scorecard and report out to you. And it does -- it's very difficult to try to decompose beyond that. And it's very simple to say 1 overall number. But -- and it's an absolute, multidimensional combination of those factors that contribute to the net scorecard that we report out to you on this kind of basis.

That's helpful, Rick, and maybe just at the Analyst Meeting, if we could figure out a way to sort of get a little bit of more color for what the shareholders are getting for the investments, the charges that you're taking.

Okay.

And then just a more specific question, just looking at the EM margins going forward. What kind of, I guess, what kind of recovery do you now plan on over the next few quarters, if this is the market and you have made some business adjustments along the way, how quickly can you recover from 4.3%?

Harley, you want to jump in on that one?

Sure, Rick. Hi, Steve. So obviously, as you suggested a moment ago, we will go into more granular detail next week at the Analyst Day. But to be clear, we still view 5% or greater as a very achievable goal for EM. So don't expect to see anything next week that suggests that we no longer view that as the proper productivity measure for EM. Clearly, certain factors, as Rick outlined in his script, have changed the timing of when we anticipate we will cross back over that milestone. I don't want to give you a date today because honestly I don't know it, and I'd rather have the luxury of going through the logic in detail next week. But I would say I see no reason short of, obviously, a significant macro event that I can't predict why we wouldn't still believe that, that goal is achievable at some point in our new fiscal year.

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

I just wanted to follow up on EM, but more on the book-to-bill ratio. So I guess, Harley, this is your cue to jump in. I guess, where have they been in April and maybe if you could give it, I guess, April relative to March and then maybe some regional perspective as well.

Sure. How are you, Shawn? Book-to-bill in April has continued along the same pattern as the March quarter and indeed, the December quarter. So one of the factors that does provide a degree of confidence for us as we tend to look forward is the fact that we now are, in essence, 6 months and, let's call it, 3 weeks of positive book-to-bill, widespread across all regions. So we feel good about that. I think you probably saw that called out on a number of the commentaries and transcripts from the many of EM suppliers that have announced over the last 48 hours. A couple of them, I recall, specifically made note of some beginning of an inventory refresh from their channels. So we can validate that indeed, our book-to-bill continues positive and of course, that will drive some adjustment to our pipelines of inventory.

Okay. And then as a follow-up question, servers are weak. There's been some news about maybe one of your large TS customers maybe divesting that business. I guess if you could update in terms of the IBM, I guess, on the high end, and if you've seen any disruption as they've added some incremental players, and then also just kind of how you think about your server exposure going forward.

Yes, Shawn, this is Phil. I'll jump in on that. I certainly anticipated the question around the IBM. So -- and it's really 2 parts. So let me answer that one first. Obviously, we're in regular contact with IBM on what they're going to be doing with their server business and there's nothing, as you know, that's official there at all. So we're in contact with IBM. We feel good, obviously, with where we are with IBM and roughly, that server business for us represents in the 5% to 6% of our total TS business worldwide. So if you look at it that way, it's somewhat limited exposure, and we'll react and do what we need to do if, in fact, something comes to fruition there. But I don't think it's going to happen that quickly. We're in contact with all of our partners, obviously, around that as they contact us. And again, there's been very little disruption at this point in time; it's only been 1 week or 2. With regards to the additional distributors that IBM added, I've got to say there's been no impact at all, no disruption to our customer base, the partners as we see it today, and we really don't expect that to be an issue moving forward either.

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

Rick, maybe just another bigger picture question. If I look at the drivers of return of capital, whether that be margins or asset velocity, you've done well on the asset velocity side. You're probably in the eighth or ninth inning. Yet on the margin side, we seem to be stuck in these sort of cyclical ebbs and flows. And I just want to revisit, is there any concerted effort to structurally drive margins higher outside of cost cutting in your 2 core businesses? A few quarters ago, we were talking about ITAD, we were talking about services and I haven't heard much lately. So I just wanted to see if you could address the margin question. Is there a concerted effort to try to structure, enhance margins outside of your 2 core segments?

Yes. So great question and actually, it's a bit of a tee-up for our conversation next week, Amitabh. We are looking at adjusting and turning some dials in a variety of our investment areas, for example M&A, and bringing some more sensitivity to prioritizing activities that do lead to margin expansion, both organically and M&A, by the way. So if you don't mind, take a rain check on the big answer there because we want to be careful to present the context of the overall strategy and then talk about -- it's -- think of it as taking our VVM philosophy to the next level, okay?

Okay. Perfect. If I could just follow up then, cash flows and buybacks for the June quarter, if I look at the trend last year, you had a nice snapback in the June quarter. Should we expect something similar? And Kevin, when can we expect you guys to resume your buybacks? A little disappointed to see that you didn't procure any shares in the March quarter.

Sure. Sure. I'll take the 2 questions. In terms of cash flow for the Q4, based on the guidance we're providing, we expect to generate approximately $150 million in free cash flow this quarter. And then on the buyback, you're right. We did not buy back any shares. We still have approximately $225 million outstanding on the previously announced program. As we've highlighted in the past, we've become more interested around book value and have become more aggressive when it gets closer to tangible.

So Amitabh, we do have a standing authorization in place. So depending on the ups and downs in the market, that we could be participating again and of course, we'll report that on Q4 in the August timeframe. But so just -- but you know, we do have a standing authorization and schedule in place.

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

Two questions. First question, how is pruning businesses, so to speak, or focusing on better profitability businesses and letting some go in both TS and EM impacting you guys, Rick? And then from a pricing perspective, you've mentioned Europe competitive pressures on a year-over-year basis. Have you seen any changes there quarter-over-quarter or recently, I guess?

Yes, Scott, let me start with the pruning and overall, then I'll ask -- maybe ask Harley and Phil chip -- chime in on Europe. So Scott, the -- when it comes to portfolio management, you would understand that probably our starting point on any investment we begin is that we're going to make it successful. However, as part of our commitment to VVM, I would tell you that we come to the conclusion in some small segments of the overall business and sometimes, you get a segment with a large acquisition that maybe isn't going to make it in the long run and you give it a certain amount of time to demonstrate a certain amount of performance. And if it's not there and we do not believe that, long term, we can sustain the committed returns on capital that we show -- avidly share with you, then we make the decision to exit. But that also has impacts as you'll see if you look at the details of our special charges, and that's real money and we treat it that way, by the way. However, as we evaluate our entire portfolio, it's not just always about how to make it better. There's a sort of a start, stop, continue philosophy and in some cases, we've come to the conclusion we needed to stop and we want to reallocate those resources somewhere that they can now generate the acceptable returns. So just part of the overall portfolio management philosophy. And like I said, look through the details of the special charges and you will see segments where we've decided we're getting out and moving on and reallocating the resource. Europe, Harley or Phil, you want to jump in?

Sure, Rick. Hi, Scott. I was thinking as you asked the question, in a way, it ties back to the question asked earlier by Steve Fox around the charges and what we're getting and the intent. And I'll use America, and obviously I'm speaking specific to EM as an example, if you look at the way we categorize the region, we correctly categorize America as being below typical seasonality and EMEA being above. But one of the drivers to that aggregated result in America is the pruning of some of the business that we deemed not long term and not strategic for us. And we've been moving away from that in a very premeditated way. If I pull that out, for example, our core component business in America really would be better categorized at maybe low end of seasonality as opposed to below. So when you take it down a detail lower, it gives you a bit better view on how the business in total is acting. Reinforcing what Rick said, when we think about these pruning decisions, on the EM side, we think about is it a business that is permanently changed and therefore, we should adjust investments to match the reasonable volume and profit expectation of that business. And inside of a portfolio as large as ours, there are some. But in addition to that, there are some businesses that are not altered in a sense, as I mentioned on the previous. But more so, we have determined that over time, they're -- the opportunity for us to achieve the long-term goals we need to aggregate up to our total goals are not predictable; therefore, we're moving away from them in total. So our moves are really a combination of those 2 tactics.

Yes, from TS perspective -- hi, Scott. I think this is a great question and particularly with -- surrounding Europe. And next week at the Analyst Day, Graeme Watt will be there, who's our leader in Europe, where we can do a lot more deep-dive formally and informally during the Analyst Day. And obviously from the TS perspective, a little different than EM, this is -- this is our, you noted, a public challenged market that we need to, as we like to say, move the bubble up, okay, on the returns. So the team is working diligently. Rick touched on expense reductions. We've been managing expense reductions in Europe throughout the year, okay, quarter-on-quarter. Sometimes you don't see those necessarily based on new acquisitions coming in like Magirus. In some cases, it just doesn't -- you don't see the apples-to-apples, and this goes back to Steve Fox's question as well; there's a lot coming in and a lot going out. But on the revenue deselection, if you will, this is happening. Some of these are more public in nature, if you will, like when we decided to pull out Italy, all right. Others are just where the team's managing the business day in and day out. But part of the challenge is once you do get out, then it hits your organic growth for the next year, okay. That revenue is not in your business. So some of these do tend to haunt you a little bit as you look at the top line growth. But as long as you're seeing the benefit on the bottom line and we find a business that's terminally ill, if you will, then we're going to manage out of it, okay. We can go in a more detail next week, and there's a few cases we can share with you. But it's got to be -- it's everyday -- it's every day operating of the business.

Our next question is from the line of Ananda Baruah with Brean Capital.

I guess along the same lines, if the demand environment stays relatively as is through the balance of this year, so say softer -- kind of soft seasonal -- just softer than seasonal, at what point do you expect the cost actions that you're sort of taking fairly regularly now to begin to drive leverage again?

So Ananda, it's Rick. I'll ask Kevin maybe to comment as well. So it's always -- remember, as we take the actions, they will be realized and impacted in the following quarters. Normal seasonality, as you follow our patterns for the rest of the -- we don't provide multi-quarter guidance, but if you go with your assumption of the normal seasonality going forward, typically, September quarter is a little bit of sequential down and then of course, we head into the big year end for TS, with some -- a very mild growth, I think, for EM typically in that quarter overall. If you're planning for those particular environment, if you said normal seasonality going forward, the $40 million we're talking about today will kick in, in the first half of the year. And of course, any adjustments that we're adding along the way including -- by the way, if the $40 million ends up being a different number when we're done, we'll report on that when that's finished and you'll know exactly how to model that out into the first half of our fiscal year. It is an ongoing process. It's constant evaluation and again, we're trying to balance between the need to have cost reductions be a part of the margin improvement plan while at the same time, as I said, staying sensitive and being able to respond to the marketplace and provide the proper service levels for the business that we do have today. So it's that full combination that's keeping us busy and is a constant evaluation quarter in and quarter out.

And Rick, to amplify a little bit more, I think the other thing we look at is obviously, we take into account the impact of the completed acquisitions the past quarter over the last 12 months that clearly, we're continuing to work on. Clearly, though, the weakness in the business we're seeing is due to market environment has lasted much longer than we have seen historically. The team here knows what needs to be done, and we're going to keep at it.

And your -- is it your intent to pass all of the cost savings through to the bottom line?

With the $40 million we're announcing today, yes, that would -- that should be 100% through to the bottom line. We'll net you out on the puts and takes and any other influences to the total cost factor, of course, when we report out on the fourth quarter.

Our next question comes from the line of Brian Alexander with Raymond James. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: If I could go back to EM profitability, and if I look at the March quarter and compare it to March of 2008, I know that's a long time ago, but a 5-year period, EM revenue was up by, I think, $1.2 billion. Operating income is only up about $8.5 million. So we've seen an incremental margin of less than 1% over 5 years. I realize regional mix has gone against you, but it seems like there might be other factors at work here outside of cyclicality and mix. And I was just wondering if you can talk about that and why we haven't seen more margin expansion over the last 5 years. And is any of it structural in your mind, or is it all really mix and cyclical? And Harley, related to that, I think you said earlier you're striving to get back to 5% operating margin with an undefined timeframe, and I know we'll talk about that more next week. But I just wanted to make sure the goal is still 5% to 5.5%, or has that come in?

Go ahead, Harley.

Hi, Brian. Yes, what I said was 5% and above, okay. But yes, we will give definitive detail on that next week. So Brian, I can't add a lot of intelligence to a contrast of the current quarter to 5-years-ago quarter. I can next week if you like, but I don't have that data in front of me. But I think your question was more a general question about from a secular perspective, are there things that are fundamentally changed in the industry over to that multiyear period that are additionally impacting our ability to drive proper margin and drop-through. Is that fair? Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Exactly.

Yes. The difficulty I have here is that the benchmark comparison to March quarter to a previous period is very difficult in contrast for many reasons. Now I was looking at some data actually this morning in preparing for this. One of the data points that I track, for example, is design win revenue growth as a comparison to overall revenue growth. And in periods of exciting drop-through and margin production, there was a -- there will be -- I shouldn't say there was -- there will be because historically, it has happened this way, a fairly significant gap between those 2 data points: design win revenue contrasted to overall revenue. One of the impactors and one of the reasons why you see us talk often about revenue deselection is if there is a secular trend that has driven or created a higher degree of profitability, not only with EM but in the channel, it is that ratio changing of fulfillment and lower margin revenues to demand creation revenues. And in many ways, when we talk about deselection, we are not saying that this is bad business. We're saying that the ratio and the balance is out of whack from where we need to drive the portfolio. So one of the things I talk a lot about in my talk next week is premeditate balancing of the portfolio and a number of the decisions and, by the way, number of investments that we are making to create a better balance. It indeed is that balance that is out of whack. We talked in the script, for example, about gross margin pressure in Europe, and we will also have our European President there next week, so he could talk in more intimate detail. But one of the factors that's driven those results, because our performance there is still quite good and the sequential growth was what we were indeed looking for, but even in Europe, an area that we really have, heretofore, not experienced this to a great degree, our percentage of revenue coming from high-volume fulfillment is higher than it's been in the past and, quite candidly, it's higher than I like from a portfolio management standpoint. So that is probably the biggest secular change, Brian, that I could offer you up here impromptu to your question. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: That's very helpful, Harley. Maybe just one follow-up on cash flow. Was there anything unusual from a timing standpoint that impacted cash flow in the quarter? Or is this just a natural result given the mix shifted toward EM and within that toward Western regions? And Kevin, did you say free cash flow next quarter would be $150 million? Was that for the June quarter, or did I misunderstand?

Yes, cash flow from operations will be $150 million in the fourth quarter. And Brian, nothing from a timing standpoint on the Q3 cash flow from operations number and in fact, it's very comparable to last year. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: So the $150 million, I think that was down year-over-year versus what you did in June of last year. So I'm just -- I guess my question is on an annualized basis, do you think you've hit a plateau in cash flow? Or do you think that can reaccelerate as we move beyond Q4?

I think it really depends on the market and growth and where we are in terms of the end markets.

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

I just wanted to dig a little bit into some of the P&L numbers in terms of looking at the SG&A, a bit higher than I would've expected. Was that related to acquisitions? And what type of levels would you expect SG&A to be going forward? And then thinking about the restructuring actions you're undertaking, will you see any benefit to SG&A from the restructuring? Or do you think that will all be in the COGS line?

Sherri, it's Kevin. I think as we were talking about a little bit earlier, a number of factors when we look at the change in operating expense sequentially and year-over-year, obviously, with the complexity of the business, a few moving parts. But we have taken into account the impact of the completed acquisitions in the past quarter, the M&A over the last 12 months, coupled with the impact of foreign currency exchange rates and inflation. But we do believe, based on the actions we have taken previously and what we have teed up to have completed by the end of this fiscal year, we are expecting a sequential reduction of $5 million to $10 million in our fiscal fourth quarter operating expenses versus Q3, assuming no changes in foreign currency exchange rate or acquisitions.

And then going forward, do you think you'd be able to keep the SG&A flat?

I think based on -- again, assuming M&A activity, that would be our kind of objective as we go forward, but we have to balance with M&A, foreign currency and those type of elements. And Sherri, just to remind you, in Q1 next year in our fiscal year, we have the Q1 spike on the executive compensation. Okay.

Our next question comes from the line of Mark Delaney with Goldman Sachs.

Great. I was hoping you could maybe help us understand the inventory dynamics a little bit better. I understand your inventory is down 10% year-over-year organically. Could you, maybe, put into context your view of inventory levels across the supply chain and then what your plans are for your own inventory in the June quarter?

Yes, Mark, it's Rick. I assume it's primarily related to the component inventory?

Correct.

All right. Yes, Harley, you want to jump in?

Sure, Rick. Mark, as you probably saw in the release, we achieved another, actually, a good performance -- I'm hesitating, I don't know if it's a record, but a good performance in the March quarter on our velocity -- inventory velocity, which is really what we track far more than dollars. It's an interesting question because we're all trying to decide if we're at an inflection point or if we're going to be having the same conversation 3 months from today. We watch lead times by commodity closely. There have been a couple where we've seen a little bit of stretch. Hard to declare yet if that is an indicator of a broader trend, so we'll watch that aggressively through the quarter. At this point, our guidance implies that we will manage inventory similar to the way we did in the March quarter. But we are eagerly watching it because indeed, one of the areas where we have been denied a degree of profitability that we typically enjoy in a healthier market, a market with longer lead times, and to be candid, some volatility on lead times, is some upside margin on multisource commodity type products. And in this environment, that has not been an area that's produced the profit that we typically would hope for. So we watch it eagerly because we feel very confident about our financial position. And if we see some opportunities to invest, we will indeed do that. But to be clear, our guidance, based on what we see this quarter, does not suggest significant investment. But as I say, make my day. We'd love to do it.

So Harley, it's probably fair to always remind, it's probably 2 key signals we're looking for. Demand signals are one thing, and then any movement in lead times will be another, right?

Right.

That's very helpful perspective. I appreciate that. As my follow-up question, on the TS side, first, can you guys give us an update on how big within TS the PC component business is currently? And then related to that, maybe tell us within the other -- within all your different product categories, which one are going to be most important to drive gross margin?

Yes, let me look at the PC components. This is Phil, by the way. The PC components business, roughly in the $500 million to $700 million range, okay. That's a range for you. I don't have an exact number right in front of me here, but that's about accurate, okay. And the second part of the question, was that within the PC components or driving margins in general?

Store -- more generally storage services, software...

Yes, we're real pleased with the past 2 quarters' performance in margin, increasing both sequentially and year-on-year. Much of this is going to be driven by mix. As we've been stating, we'll talk more next week at Analyst Day, it's going to be a busy day, by the way, the drive to mix with services and software as a greater percentage, that's been a driver and a strategy for us that the team is executing on. And storage, you just mentioned storage. Storage continues to be the lead technology for us, and our success rate with the storage product lines is extremely positive, so that's good news. But I would just say, those couple key areas: mix, drive the services, software and of course, geographic mix. We can get -- we're pleased with the margin levels in Europe and Americas, by the way, as well Asia for the level that it runs. So we get -- as I said earlier, we get the European team operating a bit more efficient, okay. We should see a good drop-through, and any kind of growth is going to see good drop-through as well.

Yes, just to be clear, we're pleased with the gross margins...

Gross margins, yes.

But we've got some work to do in Europe.

Yes, thanks for the clarification. I hope that helps more.

Our next question is from the line of Matt Sheerin with Stifel Nicolaus. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: First question for Harley on components. You talked about book-to-bill, Harley, being slightly above 1 in all regions. You just came off of a below seasonal quarter in North America, better in Europe. How do you look at trends? Because your guidance for the next quarter is within that 1% to 4% seasonality range for the overall business. So are you still expecting North America to be down again -- rather, to be below seasonal?

Matt, no, I think I probably would categorize North America as low end of seasonal, as I likely would for all regions. I hesitated because the one question that evolves this time of year is around Asia. And we are all waiting to see the incoming booking levels in Asia through -- into May actually, tell us a lot about the upcoming business environment over the summer. And why Asia is so important? Because Asia does have an impact depending on the strength of our business overall. It can have an impact on lengthening lead times and creating a degree of volatility around lead times for the balance of the industry as well. So today, based on how we view the business, I'd categorize the West as low end of seasonality, and I'd categorize Asia as a question mark. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. Fine. And in earlier, I think your point on the design revenue versus fulfillment revenue was important. And I know in past cycles, increase in design activity has often been a good leading indicator of forward demand. Are you seeing any pickup at all in the design side?

Well, it's interesting, Matt. The -- I'll give you data. It won't mean a whole lot to you, but we're a pretty broad barometer of the market. Year-to-date, so for us that's 9 months, our design win -- to be clear, it's design win, not design registration; they are 2 very different things. Our design wins are up 12.5% year-to-date. But our design win revenue is up really consistent with our overall revenue numbers, which, as I'm sure you would guess, is somewhere approaching flattish year-to-date. So there is a real disconnect there, and that was the point I was trying to make earlier is as that gap changes, historically speaking, that has meant good things for us from a profitability perspective. Are there signs? Well, I like the bookings. I saw some positive comments in some of our suppliers' transcripts. TI, for example, who also is a relatively broad barometer, singled out some improving conditions they've seen in their broad industrial base, which is where we connect with them as their largest distributor partner. So there are some encouraging signs. I saw one actually this morning that somewhat obtusely gave me some encouragement, and that is Teradyne reported extremely strong bookings in their announcement this morning, which is encouraging because I think the overall semiconductor equipment industry was down double-digit in 2012. So I'll be looking for the other big semiconductor equipment guys' notes this quarter to see if indeed they are seeing increased booking activity in their end, which to me will be another sign that people are preparing for better environment coming forward. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. That's quite helpful, Harley. And just a quick one for you, Kevin, on the June quarter, you gave us sort of a ballpark for your OpEx number. So that would imply that gross margin for the whole enterprise would be down 10 to 15 basis points, give or take. And is that just a function of seasonality in the computer business and also a stronger revenue in Asia or -- versus the Western markets in the component business?

That's correct, Matt.

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

First, a housekeeping question, then 2 questions. The housekeeping question is, could you let us know on the tax rate outlook? And then my real question is, on M&A, can you help us understand your M&A view this year, say, last year? As we think about your cash levels and where they sit today versus, say for example, 1 year or 2 ago -- I'm sorry, 1 year ago or so, ending last year, your cash levels are down quite a bit. Does that mean you're going to take your foot off the M&A level? Or would you actually consider using debt to do so? Or is it just a matter of timing of the seasonality for the cash flows? But an outlook on M&A. And then the second question is, a while ago, both yourself and Arrow mentioned a focus on aftermarket services, such as recycling or repair, refurbishment and the profitability was materially above your corporate profitabilities today. Can you let us know if that's still a focus, what are the margins like in that business, and how big of a percent of your business it is today and looking ahead?

A lot of questions there, Jim. This is Rick. Let me start and see if I could get your answers. I think a couple of things we've already covered in the script, but just to reiterate. On the tax rate, I think we said expectation is 27% to 31%?

That's correct.

And then M&A, we are not out of the M&A business. I think we shared in the script that we've put $244 million fiscal year-to-date into new M&A. We maintain an active pipeline. We consider M&A still a very relevant and important part of our overall profitable growth plans, and we'll have more details on that next week. And some of that M&A has included investments into providing lifecycle services, and I'll just say we're going to have a much more robust update on that specific topic also next week at our Analyst Day overall. So you've got the tax rate. M&A still part of our profitable growth plans. We like the financial footprint that we have, the cash flow characteristics, the total liquidity that we have available today. We feel we are rested and ready and investment ready to take advantage of opportunity. And then more specifically, we see those opportunities and what they do to us longer term from a margin perspective and growth perspective, that's what we'll give you more details on next week, if that's okay.

Our final question is from the line of Lou Miscioscia with CLSA. Louis R. Miscioscia - Credit Agricole Securities (USA) Inc., Research Division: Okay. Great. I got in a little bit late, so I apologize if someone else asked this already. But maybe could you give us a little bit more granularity on the TS side, just which areas you saw a little bit more strength out of, if you saw some strength anywhere, maybe in the storage or maybe in the areas of virtualization, please?

Yes, I'll take this from a technology standpoint. Lou. This is Phil Gallagher. Yes, we actually saw very good growth in the -- double-digits in storage, continues to be strong year-on-year. We saw good growth in networking and security, also double-digit. Virtualization continues to be strong. Converged in general, okay, as a focus and a market that's continued to evolve. We're seeing great success in all the converged solutions that we have to offer the marketplace. And also in our own services. So back to Jim's question, which is a good one, Jim, on the whole services offerings, we're seeing good growth in that space. We're really doing a lot of work to impact the whole IT lifecycle. So we will expand on that, again, next week in much greater detail as to what we're doing from, as I like to say, womb to tomb in the IT lifecycle of the products. But anyway, that's in general where we saw the growth and very pleased with it. And to the question a little bit earlier where we saw some of the weaker growth was in the computing component space, okay. So it's a good question. That's an area that we did see some decline in growth, which makes sense because a lot of that's tied to the PC and more the consumer space that we still have that small business operating. But it was down pretty significantly. Okay.

Phil, I'll add [ph] , just in the storage, just that the overall topic of converged solutions overall, it's interesting to see some traction there with the customer as well gaining momentum in the marketplace. So... Louis R. Miscioscia - Credit Agricole Securities (USA) Inc., Research Division: Okay. Great. And then just one quick follow-up, which is very quick to answer in just a short sentence or 2. But obviously, there's a tremendous amount going out on with the cloud, especially with a lot of SMBs putting more of their applications up on AWS or maybe with Rackspace. Either now or if you want to hold it till next week, if you could just maybe give us a thought as to how you're sort of trying to address those new applications possibly shifting off of a normal VAR over to the cloud.

Yes, go ahead, Phil.

Yes, Lou, this is Phil. I never had anyone ask me to answer the cloud in a sentence or two. So I guess a little tongue-in-cheek there because it's so complex. We're right in the middle of this, and this is what we'll touch on, again, next week. So we don't want to sound like we're deferring everything. This one's definitely strategic position for us in the marketplace. We feel we're really well positioned. We're working with many partners, obviously, in building alliances with a lot of service providers. We'll talk about that next week, guys like Savvis where we've gone public with that; Amazon, as well as our current supplier base, okay. So even when you talk about converged solutions, I mean, whether you're talking about Vblock, Pure, VCE, Cloud Matrix from HP, a lot of those are being marketed and sold as private clouds, okay. So we're right smack in the middle of that one as well, and we're really playing the role of the great aggregators, as I like to say. So whether it's a traditional product and integration solutions that we're going to go provide, great. If it's virtual, more of a virtual solution that the partners are looking for, we're providing that as well. One of the most recent acquisitions we did and that we announced 2 quarters ago, Pepperweed. Their primary service delivery is around the cloud, okay, and they're working with our partners and end users to pop clouds up. So whether it's us providing it as an Avnet brand and work with our partners, enabling them, or working with our suppliers selling their cloud solutions or building alliances outside our traditional partner network, we think we're right in the middle of it, okay. Again, a lot more to come, but we're pretty excited about it, frankly.

Yes, but Lou, I'd say we're big proponents that the data centers of the future are going to be combinations of on-premise, off-premise, physical and virtual. And we still think we play a very integral part of bringing those together. And I would tell you that the top services interest, I think, that we're finding among our partners today, cloud enablement, top of the list; web portal, second; and the analytics, third right now. And again, we'll have more details for you on that next week, too.

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.

Thanks, everybody.

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