Good afternoon. My name is Kalia and I will be your conference operator today. At this time, I would like to welcome everyone to the Jabil second quarter fiscal year 2008 conference call. (Operator Instructions) Ms. Walters, you may begin your conference.

Thank you and welcome, everyone, to our second quarter fiscal year 2008 call. Joining me on the call today are President and CEO Tim Main and our Chief Financial Officer, Forbes Alexander. This call is being recorded and will be posted for audio playback on the Jabil website in the investor section, along with today’s press release and a slideshow presentation on the quarter. You can follow along with the presentation the slides that are posted on the website and begin with slide one now. Our second quarter forward-looking statements -- during this conference call, we will be making forward-looking statements, including those regarding the anticipated outlook for our business, our currently expected third quarter fiscal year 2008, and full fiscal year 2008 net revenue and earning results; our long-term outlook for our company and improvements in our operational efficiency and in our financial performance. Statements are based on current expectations, forecasts, and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially. An extensive list of these risks and uncertainties are identified in our annual report on Form 10-K for the fiscal year ended August 31, 2007, on subsequent reports on Form 10-Q and Form 8-K, and our other securities filings with the SEC. Jabil disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. If you could please now turn to slides two or three, our results for the second fiscal quarter. On revenues of $3.06 billion, our GAAP operating income was $1.6 million. This compares to $36.7 million GAAP operating income on revenues of $2.93 billion for the same period in the prior year. The reduction principally due to restructuring charges, which were $41 million higher than the year-ago…

Thank you, Beth. Good afternoon. I would now like you to turn to slides six, seven and eight. The company’s sales cycle in the quarter expanded by one day to 23 days. Days sales outstanding decreased by three days while accounts payable days outstanding were consistent with the prior quarter at 63 days. Inventory days increased by four days from the prior quarter, inventory turns being eight. In dollar terms, inventory grew by $10 million versus the November quarter, as a result of the scheduled declines we saw in mid to late February impacting our third quarter. We would anticipate inventory reductions as we move through the upcoming quarter. Cash flows from operations were approximately $134 million in the quarter versus zero in the same period in the previous fiscal year. Our returns on invested capital were 8% as compared to 7% in the same period of fiscal 2007. Our cash and cash equivalents were $531 million, $133 million lower than the previous quarter, reflecting the repayment of $150 million on our revolving credit facility. Our capital expenditures during the quarter were approximately $87 million, including approximately $27 million related to our ongoing expansions in China, India, Poland, and the Ukraine, along with associated IT infrastructure of $20 million. Our depreciation in the quarter was approximately $58 million, and EBITDA in the quarter at $126 million. During the second fiscal quarter, we completed a $250 million 8.25% 10-year senior unsecured note offering. Proceeds from these notes and cash flows from operations during the quarter were used to pay down $400 million drawn on our five-year, $800 million revolving credit facility. During the quarter, we also terminated the 180-day $200 million revolving credit facility we had entered into in the December period of 2007. At the end of the second quarter,…

Thanks, Forbes. Fiscal Q2 came in as expected. Cash flow from operations was good at $134 million. This could have been better but inventory levels were a bit higher than expected as forward-looking demand softened leading into fiscal Q3. Over the course of the last 90 days, but in particular during February, demand expectations declined significantly. Our revenue expectations for the second half of our fiscal year are now approximately 7% below our previous estimate. This decline is clearly a function of softening macroeconomic environment. There are no customer losses or material program or market share losses driving the decline. We have seen the largest declines in telecommunications and our display sectors but most sectors experienced a reduction. The exceptions to this, our computing and storage sector, and our after-market services business, each continuing to show positive gains in a poor environment. We had been on the good path of margin recovery, showing 170 basis point improvement in core operating margins from fiscal Q207 to a 3.6% level in fiscal Q108. Regretfully, this progression will be more challenging in the next quarter or two due to the reduced revenue outlook. Our business is actually in very good fundamental condition. While acknowledging room for improvement in certain areas, we have no known major fixes or issues or broken parts of our business. We will work our inventory levels down a bit and drive cash flow while demand is slack. Thankfully our balance sheet is in good condition to accommodate the current environment. With no major issues to fix and the ability to ride out the present turmoil, we can focus on growth and our prospects for fiscal 2009, now less than six months away. Recessions come and go and the stronger players can use the opportunity to strengthen their position and really thrive in the early period of recovery. Our new business activity has been quite good. We have sizable new customer wins in telecom, medical, mobility, and industrial areas amounting to over $750 million in annual revenue. This, combined with a wide range of new program wins with existing customers and rejuvenated growth in mobility should result in a robust fiscal 2009. Revenue growth will contribute directly to a strong resumption of margin expansion, sustained free cash flow, and improvement in our returns on capital. We will focus on this future as we manage through a more challenging present. Thank you.

Operator, we’re ready for the question-and-answer session.

(Operator Instructions) Your first question comes from the line of Louis Miscioscia. Louis Miscioscia - Cowen & Company: Can I ask a question about the August quarter? It seems given your full year EPS guidance that there’s a reasonable EPS bounce-back in the August quarter, where I guess normally I would have thought that seasonality wouldn’t help too much, that August would more likely be flattish to May. Is there anything going on like restructuring that’s helping or is it really just revenue growth kicking in?

I think the forecast calls for about $100 million of additional revenue in the quarter, which is a function of a variety of programs that are ramping currently and some recovery in our mobility business, which we have. Actually, given the current environment, have pretty good confidence about. And if you look at the operating income improvement, there’s about a $35 million improvement in operating income in Q4 from Q3. Where that comes from, there’s about $10 million of benefit from the rationalization and manufacturing efficiencies, which leaves about $25 million improvement and that’s really driven from the revenue -- about $20 million to $25 million, depending on mix, $20 million to $25 million of operating income for each additional $100 million of revenue. Louis Miscioscia - Cowen & Company: Okay, and then looking at the consumer area, it looks like from a seasonal aspect, I’m assuming mobility is flat quarter to quarter after the big drop in the February quarter, but displays continue to decrease. Is there anything else that’s going on under the cover there?

No, no major customer losses or program losses. Actually, if anything, we’re expanding our market share there, such as it is. We have an inventory correction going on. We actually drove LCD TV production pretty strong throughout Q1 and actually going into Q2 and I think demand really backed up on our customers in that space pretty quickly as consumers basically stopped buying. So we’re going to see the downturn in Q2 obviously extend into Q3 as that inventory correction takes place. Louis Miscioscia - Cowen & Company: Okay, and then a final question on another industry topic -- for computing, networking, and telecom, you’ve got it flat quarter to quarter obviously as per your guidance. Would normal seasonality give you about a 5% lift going into the May quarter?

Typically, yeah. We definitely see some bounce-back from our February quarter in May. Louis Miscioscia - Cowen & Company: Okay. Thank you.

Your next question comes from the line of Brian White. Brian White - Jeffries & Company: Tim, could you update us a little bit on the vertical integration in the mobile handset area? I think we were looking forward to that some time in late ’08?

The integration has gone pretty well. We have things like SAP integration completed. We won a number of new programs and actually had a couple of new customers in that space and as we talked about in prepared comments, the mobility sector is stable Q2 to Q3, so we have been experiencing pretty much sequential declines for the last year-and-a-half as we reduce business with our major customer in that segment. That’s now stabilized and what we’ve talked about in previous conference calls and conferences out on the road and that type of thing is that we would expect business there to stabilize and then start to grow again in the back half of this year and indeed, that’s what we see happening. So we are actually pretty pleased with the way things are going right now. Brian White - Jeffries & Company: Okay, and in the display business, I know Philips has brought on other companies to help them with some of the assembly work. You don’t think that had anything to do with the soft outlook in displays?

No, they’ve been doing business with other folks for a long time, and so that really has nothing to do with it. Brian White - Jeffries & Company: Well, I know, but they brought in some new partners.

They churn people all the time. Brian White - Jeffries & Company: Okay. Thank you.

Our business with Philips is actually up this year over the previous year.

Your next question comes from the line of Amit Daryanani of RBC Capital.

Thanks. Just looking at the overall demand softness that you talked about over the last 90 days, could you just talk about -- are you starting to see some stability in your order book at this time or is it a case where every time you run that order book, things seem to be a little bit softer?

Well, I think Forbes will probably slap me for this but I think things are bottoming, actually, from what I can see. I tend to be a little bit more optimistic and pro-business in these environments but the housing market kind of led us into this. That stabilized. Some of the white goods customers are stabilizing. You know, the computing and storage segment continues to do pretty well. Consumers have backed up. Consumer confidence is at an all-time low in the United States but demand is still very strong in Asia. Europe seems to be hanging in there. So my sense is that we may see things bottom here in the spring and early summer and start to see a real strong bounce-back in the fall.

All right, and then just the computing segment, that clearly seems to be bucking the trend for you guys. Is your sense that’s really a reflection of Jabil winning more market share there, or are the end markets in general a lot more stable on the computing side?

I think the end markets are pretty strong there but we have been winning market share there as well.

All right, and then just finally one of the big positive things through the whole process for the last six or nine months has been you generated a fair amount of cash as you go through a revenue decline. Could you just talk about, given the fact that you have debt financing secured at this point, options or have you explored a stock buy-back in this environment?

Based on the valuation of selling at four times EBITDA kind of thing, we’d love to go back and buy-back a bunch of stock. The prudent side, the Forbes Alexander side of this table would say look, we’re in a recession. We don’t know if it’s going to get better or worse. It’s a good time to hold on to your cash for a little bit and make sure that the balance sheet is in good shape. If things started to turn around and we saw the business moving in the other direction -- I mean, we were generating sufficient cash, stock buy-backs would be something we would look at if we continue to be at the kind of valuations we are today. But right now I think we want to hang on to our --

Yeah, I think that’s fair, Amit. Let’s -- as you say, strong cash generation as we work through certainly the next couple of quarters and into ’09, let’s see if this business in terms of a recession trend comes back. But with the way the debt markets are today, it’s tougher and tougher out there, so I’d like to see some easing there. There are still many, many opportunities ahead of us here as we move into ’09. So I think the prudent thing to do right now is build that cash back up and we will certainly review that as we move through the balance of the year.

The way our planning cycle works, we are getting a look now at our fiscal Q1, our November quarter, from our customers and our internal business units and we might need the cash because it looks like a pretty strong growth. I’m sure everyone’s skeptical about that, as well we will be, but based on how customers are feeling and the ramp of our business with new customers and accounts and new program wins, a significant expansion in our November quarter and we might need the cash.

All right. Thank you.

We’ll take a look at it as the year progresses.

Your next question comes from the line of Kevin Kessel of Bear Stearns.

Tim, actually I just had a question here; in the statement that you guys made in your release regarding -- you actually say the slowdown in end markets will reduce your growth rate and then impede the margin expansion. And I’m just thinking back to you know, in the past the way you guys have typically talked about the businesses is the end markets have had a much less significant impact on the overall growth rate for Jabil. So what is different this time around? Is it that more of the pipeline of business is back-end loaded this year? Or why are the end markets specifically kind of the reason for the actual decline at this point?

In a steady environment, Kevin, you’re absolutely right. Our compound annual growth rate for the last dozen years has been around 25%, really only about 4% to 5% comes out of end market growth on an annual basis. However, we are hitting a pretty significant macroeconomic air pocket here and I don’t think anybody is immune from that. So it’s a -- how this usually works for us is it’s a quarter or two. Looking back on previous recessionary periods, that’s about how long they’ve lasted for us. Before OEMs get back to outsourcing, they start to look at their own internal operations and outsource a little bit more. Things kind of settle out, some of the weaker players have to exit or get consolidated, creating opportunities for us as well. When you hit an air pocket when there’s a significant contraction, nobody’s really immune from it.

And so that’s where you also get the timeframe being the next quarter or two? If it’s both, looking back at the past and how Jabil's business has performed during these sort of periods, and also looking I guess at your customers’ forecasts --

Yeah, I’ve been through two recessions here. One was not as a public company, ’91-’92 and we came out of that in ’93 and went public. And then the 2001-2002 time period and that prompted a four or five-year expansion of our business that was very robust and good for shareholders.

Okay, and then just on mobility, if I recollect correctly, the mobility segment was actually expected previously to start to show some more significant growth in the May quarter and in the August quarter as a result of numerous new programs that you guys have won. And I know now you guys are calling for more of a consistent environment. Is that more the result of macroeconomic forces or is it that some of the new programs have maybe been delayed as a result or pushed out or --

That’s really I think incorrect. We’ve said consistently that Q3 -- Q2, Q3 we’d see a stabilization of that sector in total and we actually haven’t until this quarter, in this guidance call provided specific information on mobility, other than to say the revenue declines would abate in the Q2, Q3 and then we’d start to see growth in Q4 and into Q109, which is exactly what’s happening.

Okay, great. Thank you.

Your next question comes from the line of Matt Sheerin of Thomas Weisel.

Thanks. I wanted to just ask a question regarding the inventories. You said they were up, you’re working them down. Could you be more specific about where you have some inventory build? Is it mostly in the TV display area or is it other areas as well?

It’s really associated with those areas where we’ve seen the sharp declines that we experienced in the February period, so yeah, selling displays and telecommunications were the areas that we called out, were principal areas and there’s little pockets here and there where we’ve seen less of declines. But again, with material pipelines in this business, inventories are pre-positioned during the month of February for a March and April build, and those schedules have been pushed out or cut. So we’ve been actively working that during this month in fact and through into April to work those inventories down. (Multiple Speakers) -- inventory degradation at --

Okay, great. And then Tim, back to your comments about the visibility going into the August quarter, it sounds like you have reasonable confidence that you are going to see an increase in margins and in revenue, and yet just a quarter ago obviously your guidance for the year was a lot higher than it is now. What gives you confidence or what are you seeing from your customers that gives you a little bit more confidence in another quarter out here?

I think we’re being a little bit conservative, just based on what’s happened over the last 90 days. But again, there are contribution in Q4 from new customer programs and new programs that are ramping, so we have that going forward for us, as well as the existing business. You know, it’s a -- we provided a range and that range hopefully will accommodate additional softening, should that take place. We feel reasonably confident about Q3 and in Q4, if that top line comes through at about the $3.2 billion level, I think there’s no doubt that we’ll see the -- we don’t have any doubts about the fact that we’ll see significant improvement in profitability in that quarter.

What you’ll actually see there, again in the midpoint of the guidance, what that’s implying is an operating income level around about 3.4%, 3.5% in our fourth quarter. So even though we’ve seen this substantial 7% revenue [fall-off] in the back half of the year, with that leverage coming in, it will really drive that operating income back up into the mid [threes]. And remind everyone that in our first fiscal quarter, we were around about 3.6%, so with that revenue coming back in, leverage in the cost base, we feel pretty good about that and we can continue to drive that back on up as we move into fiscal year ’09.

Okay, thanks and just lastly on mobility -- certainly you’ve seen stabilization. It sounds like you’ve got some wins there. Are you gaining traction or getting any leverage with Taiwan Green Point in terms of cross-selling and opportunities for some volume business for some of their customers?

Yeah, we don’t have anything specific to talk about today but yeah, we’re seeing some definite synergy there and I think that’s going to work out great for us.

Okay. Thank you.

Your next question comes from the line of Steven Fox with Merrill Lynch.

Good afternoon. Just two questions; first of all, when you look at the $750 million of new wins, that’s in addition to what you’ve already had in your book of business prior to this quarter? And then secondly, just to be clear on the display business, you’re confident that it’s mainly related to TV, there’s not any market share loss going on at your largest customer, and that you still have a bulk of business that’s ramping in say the second half of the calendar year?

I’ll answer that in reverse. Our business with our largest customer in the displays area will be -- in fiscal ’08 will be above fiscal ’07.

But I’m saying that the customer didn’t lose share in their market, not that you lost share in your --

No, I mean, you can go take a look at what market share is going on there. No, that’s public information out there and I’m not going to make any comments on this call. That will just get me in trouble somewhere. And then the other question, the other part of your question, Steve?

So that it’s mainly related to TVs and that your book of business in the TV business in the second half of the calendar year is still, you’re saying is pretty robust, I guess, and intact?

Yeah. I thought there was another element to your question, though.

Well, then on the $750 million --

In the new wins, right. Those wins have occurred over the last couple of quarters, let’s put it that way. They are business that won’t ramp though until very late this fiscal year and early in fiscal ’09. So they are contributions to our fiscal ’09 year.

Net of losses and whatever type of organic growth you have with the core business?

Yeah, we don’t anticipate any losses.

Okay. That’s what I was getting at. Thank you.

Your next question comes from the line of Sean Hannan with Needham & Company. Sean Hannan - Needham & Company: Great. Thank you. Just to follow-up on an earlier question, I wanted to ask if when you saw some of these changes to your order forecast, was this a consistent progression that you saw once it began, or was this more of a downward step function and kind of a softer outlook sustained from there?

So like a sudden downdraft versus -- Sean Hannan - Needham & Company: Correct.

Yeah. I mean, if you looked at week to week, it’s a gradual progression but most of the reduction occurred in a period of 30 to 45 days, so it depends on your point of view. If you look close enough, if you are very, very micro, week to week, it was kind of a steady decline. And if you are more macro, it’s a pretty sudden downdraft in the post-January, February and early March period. Sean Hannan - Needham & Company: Okay. And then just on your prior guidance, the lower end of that guidance was kind of stated as factoring some recessionary pressures, I think. That was correct, right?

That’s correct. Sean Hannan - Needham & Company: So now with this 7% decline and most of this being attributed to telecom and displays, and you are seeing some broad-based weakness in some of your other areas, is there a way that you can just provide a little bit more color in walking through these different sectors specifically?

A little bit. Automotive from a -- you know, looking at half-year guidance, so from changes from the previous guidance, automotive is down 3% to 5%. Instrumentation and medical is down about 5%. Our military business is pretty steady actually. Networking business is down a little bit and peripherals and some other areas of consumer down around 4%, 5%. It’s virtually -- it’s every sector, with the exception of computer and storage. After market services is pretty consistent. Sean Hannan - Needham & Company: Okay, and then lastly, this business that you’ve taken on with Nokia Siemens, can you comment or provide a little color around how that is playing out from an expectation standpoint today versus when you first took on the business?

I think expectations are in line. It might be a little lighter than what we originally expected.

Yeah, certainly in the fiscal quarter we just exited, it was -- our expectations -- you know, as we are looking out in Q4, it’s just a little bit lighter in terms of demand profile. Q3’s in relatively good shape. Sean Hannan - Needham & Company: And you are chalking this up to being in line with the rest of the softness that you are seeing in that sector, or is this -- is there a little bit more or less of an impact that you see from that business?

It’s a little bit less of an impact in terms of percentage terms to the sector. Sean Hannan - Needham & Company: Okay, terrific. Thank you.

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

Thank you. If I look at the numbers, it looks like the networking sector was -- the guidance for the networking sector is a little bit better than I would have thought. Can you maybe give a little bit of commentary there in terms of is that also performing better than the overall market, like computing and storage?

So our networking guidance we’ve given is consistent. I think it’s a little bit more than our previous expectations, as Tim just commented on, but we are seeing some pretty consistent demand patterns and schedule patterns from our customer base. Certainly not as volatile -- volatile is a strong word but volatile as we’ve seen in some of the other sectors. It seems to be relatively consistent in terms of the week-to-week order pattern that we are seeing, but certainly below the expectations we had 90 days ago, but not dramatically so.

Okay, thanks. And then in terms of visibility, it sounds like you guys started to see a slowdown -- obviously your comments were that you saw a slowdown starting in February. What do you think your visibility is in terms of the orders that you have in place now? Do you think it’s about 90 days? Or can you maybe comment and talk about that a little bit?

We have just a -- to kind of give some perspective, we go through our planning process. It takes a look at a full 12 months and typically we have visibility from customers for as long as 12 months. So that’s kind of the starting point. Now, with the believability obviously that the near-term forecasts are much more believable then three or four quarters out, generally looking at the next 90 days, there’s a very, very high confidence level. We’ve rarely if ever missed the current quarter. I can think of one time in the last 10 years. And looking a couple of quarters out, we tried to bracket expectations for the balance so this year on the last call. Maybe that wasn’t the right thing to do, given the fact that there were a lot of fears about going into a recession and we’ve got a little [light] in our face here because of it. I think it softened a little bit more than we even anticipated on the December call. But looking at the 90-day period, I’d say our confidence is very high and looking at a 91 to 180 day period, our confidence is good but we were just surprised. So we try to be a little bit more conservative in the guidance that we provide the further out we go, so the discounts will become heavier in the second through third and fourth quarter of any guidance we provide you. So progressive discounting depending on how far out we are going.

And would you say that your discounting for the 91 to 180 days has gotten more conservative in the current environment?

I think our mentality in preparing for this is to be a little bit more conservative -- yeah, to be more conservative, period.

Okay, and then can you just -- I’m sorry, but can you just repeat what the operating margins were for each segment in 2Q?

We don’t do it be sector, I don’t think. It’s by division.

Right, that’s what I mean.

Yeah, the EMS division was 3.2%, the consumer was minus 1%, and reflecting the seasonal nature of that revenue stream there, and the after market services was 7%.

Thank you.

Your next question comes from the line of Mark Moskowitz with J.P. Morgan.

Good afternoon. A few questions here, I have a clarification first though; Tim, did you say or suggest that the air pocket has bottomed in your view? Or how should we think about how it’s continued into March and going into April?

Yeah, I mean, I made the comment that I think it’s -- we might be in a bottoming period right now and that we might see a nice bounce-back in late summer, early fall.

And then as far as your earlier commentary regarding how things have somewhat changed in the industry in terms of how the end market, the dynamics are having maybe a little more impact on your business model versus prior years, has there been any change presently in terms of just the economics? I know maybe not so much for the current quarter but are you getting a little more negotiations and sales cycles with your customers in terms of the economics of your deals that could be a risk as you go into the summertime?

That could be a risk -- I’m not -- could you help me with that a little bit?

I’m just trying to get a sense in terms of the economics of your deals with your customers. Are they starting to give you a little more squishiness in terms of how they are feeling about their overall businesses? Maybe they are asking for some sweeteners from you that could hurt your margins as you go further out into the year?

No, the business doesn’t really work like that. If they get squishy about how firm their demand is, our offering a sweetener to them isn’t going to make it any better. We typically have -- actually, for most of our products that we build, we’re the sole source for that product so we’ll live and die based on how that product sells. And our business is actually pretty high mix, particularly obviously in the EMS sector, so it really isn’t a function of there’s less -- the pie is smaller, therefore everybody, all my suppliers need to bid even more aggressively for the next quarter’s production. That’s not really how the business works.

Okay, and then as far as the sectors, can you talk a little more about the automotive in terms of what went on in the quarter reported and how are you thinking about that business going forward? It came in a little lighter than expected.

A little lighter than expected -- that’s a seasonally down quarter, one; two, we had a significant new program win that was delayed by about 45 days, in terms of ramping and we’ll see that ramp commence and gain some steam in our third fiscal quarter, in our May quarter, and that’s why we are guiding it to be up a bit.

So you have pretty high confidence in terms of that deferral being captured now?

100% confidence in that revenue being captured. I mean, in terms of the automotive sector overall experiencing some additional decline in April or May, I mean, I don’t know. But the program that was launched, delayed launching in the February quarter is launching now and we are capturing that revenue.

Okay, and then one last question for Forbes or for Tim -- just bigger picture, obviously we are sensitive to what’s going on in terms of the last quarter. The outlook wasn’t as good as maybe folks were looking for and now we’re here again, similar situation. Just kind of wondering why you don’t provide yourself a little more wiggle room in terms of the full-year guidance in terms of the revenue range. It seems pretty tight just given that the macro environment seems to be hurting your model right now.

I think in terms of the guidance we gave 90 days ago, we gave what we believed was a pretty regular range there, about $400 million, which typically in this business is certainly discounted with our experience moving out [in these quarters]. I think we are in certainly in a recessionary environment today, which is certainly stronger than we anticipated 90 days ago. We weren’t seeing these types of indications, or we had a very strong November quarter and we are having those indications from our customers. So certainly, you know, look in the rearview mirror -- you know, it would certainly [bode as well] to widen that gap but given the information and planning process that we have at the time, we felt it was appropriate. Obviously a 7% reduction in the latter six months is pretty extraordinary in this business. I think the last time we saw anything of that nature was seven years ago now.

But at this point you -- not to put words in your mouth, but why not just go $12.3 billion to $13 billion revenue range? Why still have such a tight range?

Yeah, and then the next caller would say why is your range so wide, you know -- Q3 is here, you’ve got to know what Q3 is and then that means that the disparity in Q4 is $800 million or something and therefore you must be fearful you are going to lose a major customer. And look, we just -- we’re looking at the numbers. We are trying to be more conservative. We are only guiding now for two quarters instead of three. We’ve already taken a big step down in this demand pocket, air pocket. If things degrade a little bit but not a great deal from here, we’ll be fine. If they degrade a huge amount from here, then hopefully we’ll still be within the range but things will be certainly at the bottom. We are trying to give you a realistic look at what our business looks like.

Okay. Thank you.

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

A quick clarification just on the inventory correction -- do you think it will be completed on the communications and display side by the end of the third quarter, or will that trickle somewhat into the fourth quarter?

I would certainly hope we’ll get a majority of that done in the fiscal third quarter.

How much inventory are we talking about in terms of dollars associated with that type of reduction quarter to quarter?

Probably somewhere in the nature of about $50 million to $75 million, somewhere in that nature.

Okay, and then just a second follow-up question -- I think, Tim, you had mentioned that the outsourcing environment may have just been stopped up here a little bit. I wanted to make sure I was clear on that. And how long do you think before maybe that situation clears itself up and additional opportunities present themselves?

Well, we’re working on new opportunities all the time. I didn’t mean to say or infer that outsourcing is mucked up right now. I think what my comments -- where you are maybe drawing that inference was about what the behavior of the marketplace is during a recession and then more importantly, right after a recession, as OEMs take a much closer look at their internal factories and see that the justification of maintaining vertical capacity is a poor investment choice relative to outsourcing and they actually embark on more aggressive outsourcing programs. My experience is that when OEMs go through a recession like this, it becomes much more difficult for them to justify long-term investments in manufacturing capacity when people like Jabil can do it faster, better, cheaper. So when we start to see the end market recovery at the tail end of a recession and early in the recovery, we have the impetus of end market demand, all of the business we currently have in the new customers and we typically get some tail wind out of new outsourcing opportunities.

Okay, so the quoting opportunities haven’t taken a step back, similar to what the --

No, actually we’re pretty busy right now working on all kinds of quotes in new business.

Okay. Thank you.

Your next question comes from the line of Jim Suva of Citigroup.

Thank you very much. Tim, can you comment a little bit about a lot of people believe the EMS model is very flexible. When we see an air pocket like this, you can maintain your profitability and yet we are seeing May year-over-year revenues being up, but profitability being down. How should we think about that?

I don’t think that -- at least people that I’ve spoken with thing that when revenue goes down that you are able to maintain profitability or margins. I think our business is less -- you know, people have a tendency to think about us as a semiconductor company. If business goes down, you are going to lose money because it’s a very high fixed cost business, and that’s not true because it’s more working capital intensive than it is fixed cost intensive. And therefore, we can maintain profitability and actually generate significant cash flow during the contraction as we reduce our working capital requirements. And I think in fact that’s what you’ll see as we go through the next quarter or two. But in terms of margins and return on capital, that’s going to be a little bit more difficult.

No, I guess I was referring to year over year -- sales are up year over year for May, profits are down, and you are in the middle of coming out of a restructuring. How can we connect those dots of coming out of restructuring, adding NSM, which should be accretive, sales being up but profits being down year over year?

Yeah, we’ve added a lot of new business over the last year and we were really structuring the business to run at by this time about $3.3 billion to $3.4 billion a quarter in terms of revenue, and losing $300 million in revenue does create some margin issues for us and some fixed costs that aren’t being absorbed. So having said that, we’re very confident that once we get back to that $3.4 billion per quarter level or more, we’ll be -- margins will recover, snap back and cash flow will snap back smartly.

Okay, that answers my question. As a quick follow-up, can you tell me what Jabil's capacity utilization was this quarter and what you expect it to be? And in the slowing environment, would it be fair to think that competition in pricing is going to increase in this environment?

It depends how long the environment goes on. I don’t think it’s appropriate to think about that in terms of the next quarter or two. Capacity utilization, we’re significantly lower than we were a couple of quarters ago in Q1. It’s not a metric that we track real close that we share with investors.

Do you see any change in competitive landscape as far as pricing or do you think it’s stable or what’s your thoughts there?

I think it’s relatively stable.

Okay. Thank you very much.

Your next question comes from the line of Yuri Krapivin of Lehman Brothers.

Good afternoon. I wanted to ask you about the cost savings from your current restructuring program. I believe initially you targeted the savings range of between $100 million and $125 million. And Tim, you mentioned that in the August quarter, you’d expect to see some incremental savings of around $10 million. I’m just wondering, when do you guys expect to hit the full run-rate for these savings? And whether the original range of $100 million to $125 million is still a good range to use.

I don’t recall a range of savings of $100 million to $125 million, but having said that, we anticipate some improvement from our restructuring activity in Q3. We’ve actually been seeing some of that if you look at our SG&A line as we moved through the last quarter or two also. Tim talked about $10 million in Q4 and then what you are going to see in the first fiscal quarter of ’09, and what I draw your attention to is follow the cash. Once we accrue these restructuring charges, it’s when that cash is paid that we are actually closing facilities or downsizing facilities and unfortunately employees leaving the corporation. So we are anticipating to see much more of that in our first fiscal quarter and as we move into our second fiscal quarter of ’09, where we anticipate about $50 million of cash coming out of the company as employees leave, which will equate to probably around about another $10 million to $15 million there.

I think what we’ve said consistently since we started the rationalization program quite a while ago is that we would expect it to save us about 30 or 40 basis points. And in terms of absolute dollars, we talked about absolute dollars or cost avoidance because we didn’t have production to fill factories in certain high cost locations. So if you look at 30 to 40 basis points of benefit on a $13 billion run-rate, you’re looking at $47 million a year, $45 million a year, something like that. So if we are saving $10 million in Q4 of ’08, that’s reasonable to think that we are getting the contribution we were looking for there. You know, a lot of things change over a two-year period, so I’m not going to say it’s as neat and tidy as that but it does nearly put with what we’ve been saying.

Okay, and then I have another question about your costs. I think recently a number of companies, in particular electronic component manufacturers, pointed to yet another wave of cost increases related to things such as utilities and transportation. In Mexico, for example, currently the utility costs are going up quite rapidly. Are you seeing that kind of broad-based cost increases? If so, what’s your ability to recover those costs by charging your customers a higher price, essentially?

Logistics costs have gone up, as fuel prices have increased. Our customers pay freight out and our freight in is incorporated into our bill of material and cost structure. If we get caught with an increase mid-quarter, we have to absorb that in our margins but typically the bill of material is reset on a quarterly basis, so we would try to include that in the next quarter’s pricing. On the energy costs, frankly I have to admit that I’m not -- I haven’t heard a lot of crazy talk there. We’re not a huge energy user. It’s not a big line item in our cost of goods sold, so frankly I’m just not tracking that personally.

Okay. Thank you.

Operator, we have time for one more question.

Okay. Your final question comes from the line of Paras Bhargava of BMO Capital Markets.

Tim, at an investor conference, I think it might have been the Goldman conference a few weeks ago, I think I heard you say you’ve been seeing a slowdown for 180 days or so, and I think now you are saying 90 days, and particularly in February. Maybe you could just help put all these dates together for us.

What I said is on consecutive 90-day planning cycles, we’ve seen 3% to 5% reductions in the forward-looking plan. We plan our business a couple of times a quarter but we do one very, very deep dive each quarter. And in those deep dives and consecutive 90-day periods, we’ve seen demand fall by 3% to 5%. That’s what I said.

So really this is a slowdown that’s been going on for six months or so?

No, we talked actually in our December call about the parts of our business -- just to go back and give you perspective, in the first quarter that we actually hit 3.6% operating margin, had a great quarter, we talked about the EMS division being about $50 million light to their original plan due to industrial control customers that were facing the U.S. housing industry, so if you want to start -- call that the beginning point, that would be the beginning point. Our fiscal Q2 was a little bit lighter than what we thought at the beginning of the year and that’s gotten quite a bit deeper in the February timeframe since that December conference call. So you are probably referring to -- I don’t know, the Goldman Sachs conference that was in February and at that point in time, we had -- I said that things had weakened quite a bit in the last planning period, so I think that all kind of fits with what we’ve been saying --

Got it. Okay, and -- now last quarter, I think I remember you saying you had $400 million [new] business that’s going to come in the second half of this year and you actually broke some of it down by segment. Are you actually seeing that business come through or is some of that softening too?

All the new business we talked about is coming through. It is going to be a little bit lighter than our original plan, just as everything else is a little bit lighter -- you know, to talk in general terms.

Sure, no, absolutely --

To go through each individual program individually, I don’t know how productive that would be but in general terms, yes, when you win new business and if you hit a demand air pocket, that’s going to be a little bit lighter than what the original intent was.

And some of the business that you’ve won, if people come back, some of the other people that were bidding on it come back with lower prices -- is that sort of materializing here too or is that not happening?

No, typically when you win, you win and it’s a done deal. It can get a little dicey in some of the higher commoditized businesses but for 90% of our business, once you’ve won it, it’s won.

Okay. Final question for you, Forbes; SG&A, I think I seem to remember you saying it was going to be down a little bit this quarter and then keep on going down. Maybe you can just give us a little color what’s going on and what do you expect in the next few quarters for SG&A on a dollar as opposed to a percentage of revenue?

Absolutely. So last quarter, I actually guided up to about $115 million. We came in about 110, and that guidance up was principally around bringing on resources associated with the NSM transaction that we closed towards the end of the first quarter. What we’ve actually seen there is some good cost control there. We obviously got some restructuring dollars activity in terms of coming through there also. For the balance of the fiscal year, I’m guiding to about $113 million to $114 million a quarter. Again, we got some incremental staffing we’re getting in our IT area as we build out footprints in India, Ukraine, and China but otherwise, I would expect that to be relatively consistent for the balance of the fiscal year.

And then next year? Same sort of numbers or will it start to ramp up?

No, it may go up a little bit. You’ve got salary increases and such like working through there but it shouldn’t be dramatic. And once we get revenues back in place, we should be able to very much leverage that. I still have a strong belief system that SG&A can be a 3% type number, or sub 3% when we can pull this revenue back on the top line here.

Thanks a lot.

Thank you, everyone for joining us on the call today. We’d like to mention that management will be interviewed tomorrow on CNBC’s squawk box at 6:50 and on the Fox News Station at 7:10. Thank you very much.

Thank you. This concludes today’s conference call. You may now disconnect.