Good afternoon and welcome to the Harris Corporation’s Second Quarter Earnings Release Conference Call. This call is being recorded. Beginning today's meeting is Ms. Pamela Padgett, Vice President of Investor Relations and Corporate Communications. Please go ahead ma’am.

Hello everyone and welcome to our second quarter fiscal 2008 conference call. I am Pamela Padgett, Vice President of Investor Relations and Corporate Communications. And on the call today is Howard Lance, Chairman, President, CEO, Bob Henry, Executive Vice President and Chief Operating officer and Gary McArthur, Vice President and Chief Financial Officer. Before we get started, a few words about forward-looking statements. In the course of this teleconference, management may make forward-looking statements. Forward-looking statements involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements. For more information and a discussion of such assumptions, risks and uncertainties, please see the press release and filings made by the Harris with the SEC. In addition, in our press release and on this teleconference we'll discuss certain financial measures and information that are non-GAAP financial measures. A reconciliation to the comparable GAAP measures is included in the tables of our press release and on the Investor Relations section of our website which is www.harris.com. A replay of this call will also be available on the Investor Relation section of our website. And Howard, with that I'll turn the call over to you.

Thanks Pam, and welcome to all of you joining us for today. I am very excited to share with you our results for the second quarter and our new outlook. Harris performance showed continuing strong momentum in the quarter, in both revenue and earnings growth, and the outlook for the second half of the year has strengthened. For fiscal year 2008 in total, we expect each of our four operating segments to deliver significantly higher revenue and earnings than in fiscal 2007. Revenue was a record $1.3 billion, 30% higher than the prior year quarter. Organic revenue growth was a strong 13%, with growth across all segments. Sequential revenue increased by 7%. Operating performance was also excellent in the quarter. Non-GAAP net income, excluding acquisition related cost was $120 million. Earnings were $0.87 cents per share, a 28% increase compared with last year. In the Defense Communications and Electronics segment, which includes, as you recall the RF communications and defense programs businesses, revenue increased 18% to $472 million. Operating income increased to $142 million and was a very strong 30% of sales. RF Communications revenue led the segment performance, increasing 25% compared to the prior year and 13% sequentially. Strong demand for our broad range of Tactical Radio Systems continued across both U.S. and international markets and customers. We have a very robust sales funnel. We are continuing to add production capacity at our Rochester, New York facilities. We are continuing to roll out new products with additional capabilities. We are successfully expanding into new markets and we're successfully winning new customers and important endorsements. The bottom line is this, we believe RF Communications will continue to deliver profitable growth going forward. This is not a one-dimensional business, as some might mistakenly believe. We've made the right investments to achieve…

Thank you, Howard. Good afternoon everyone. I'm going to take the next few minutes to talk about our financial position. Cash, cash equivalents and short-term investments were $382 million as of the quarter just ended. Year-to-date cash flow generated from operating activities was $189 million compared to $182 million in the first half of fiscal 2007. All four operating segments generated positive operating cash flow both year-to-date and in the quarter, and our expectation for cash flow from operations for fiscal year 2008 continues to be in the range of $550 million to $600 million. Depreciation and amortization for the first half of fiscal 2008 increased to $84 million from $55 million in the first half of fiscal 2007. This was primarily due to the increase in property, plant and equipment and identifiable intangible assets resulting from the Harris Microwave combination with Stratex Networks and the acquisition of Multimax. Depreciation and amortization for fiscal year 2008 is expected to remain between $165 million and $175 million. Capital expenditures were $68 million for the first half as compared to $63 million in the first half of fiscal 2007. Our guidance for fiscal year 2008 for CapEx also remains between $140 million and $150 million. During the quarter, we placed $400 million of 5.95% coupon ten year fixed rate debt, and we repurchased $25 million of the $150 million, 6.35% coupon debt that is puttable [ph] to us in early February, actually next week. Subsequent to the quarter and we received notification that an additional $99 million of that debt will be put to us, the remaining $26 million will remain outstanding and will not come due until February 2028. Also during the second quarter, we repurchased 785,000 shares of our common stock at an average price of $63.64 per share. This brings our total shares repurchased in the first half of fiscal 2008 to 1.7 million. Repurchases to-date under our $600 million program totaled $300 million, leaving the remaining authorization of $300 million. At current Harris stock prices, we may be more aggressive with stock repurchases in the second half of this fiscal year. Our outlook for the full-year tax rate for fiscal 2008 continues to be at 34% noting that the tax rate for any given quarter could vary up or down, as a result of discreet events. In summary, our financial foundation is very strong. Cash flow from operations continues to improve, capital expenditures continue to decline as a percent of revenue. With our recent upgrade at Moody's, our credit rating at S&P and Moody's are now BBB+ and Baa1 respectively. Stock repurchases are proceeding as planned and our capital structure continues to provide us the financial flexibility to finance organic growth, pay dividend and pursue strategic acquisitions. Back to you, Howard.

Thanks, Gary. Let me wrap up my prepared remarks by summarizing our updated financial outlook for fiscal 2008. Harris is increasing fiscal 2008 revenue guidance to a new range of $5.2 billion to $5.3 billion that's about 24% higher than fiscal 2007 at the mid-point of the range and corresponds to organic year-over-year growth of about 12%. Non-GAAP earnings guidance for fiscal year 2008 is also increasing from a previous range of $3.35 to $3.45 per share to a new range of $3.45 to $3.55 per share. The new guidance represents year-over-year EPS growth of about 25%. Our increase in guidance is principally being driven by higher expected revenue, income, and operating margins at the RF Communications division. We now expect year-over-year revenue growth at RF of about 25% for the full-year with margins of about 34% of sales for the full-year. This will drive revenue growth of about 18% for the Defense Communications and Electronics segment and segment margins should now be at least 29% of sales for the year. There is no change in guidance for the Government Communications Systems segment, revenue growth of 6% to 8% with margins of 9% to 11% of sales. We now expect somewhat higher reported revenue growth for the year of 8% to 9% at Broadcast Communications with margins of 7% to 9% of sales, as we work our away through the cost issues that impacted gross margins. Harris Stratex Networks is now expecting higher year-over-year pro forma revenue growth at about 10% for the year. For the full-year, margins are expected to be in the 6% to 8% of sales range with improvement in the second half compared to the first half. Overall, these projections add up to another very strong year for Harris in fiscal 2008 with good momentum and with real potential for further growth in fiscal 2009 and beyond. With that we will ask the operator to please open up the line for your questions. Question and Answer

Ladies and gentlemen, question and answer session will be conducted electronically. [Operator Instructions] And our first question will come from SunTrust Robinson, Mr. Chris Donaghey.

Hi, Good evening, Howard. Great job on the quarter. I wonder if you can starting on RF, obliviously on the capacity expansion in Rochester, can you provide a little bit more elaboration on is it a specific radio type, is this all Falcon III expansion is there still some Falcon II legacy orders that are coming, is this for the Falcon III manpack. Can you just walk us through where that capacity is being added?

Chris, it's across the board, but it is primarily to fund the new radio set we are releasing. Obviously, already released the Falcon III handheld, just announced NSA approval on the Falcon III manpack. The HCLOS, a secured personal roller radio is not coming from Rochester. Well, I guess it is initially, we expect at some point to move that to the UK. So, we've got a lot of... a lot of demand across our product line. And so it's nothing specific and we also are making expansions expecting that revenue growth in fiscal 2009 that I've referred to.

Okay, great. Thanks. And on the Falcon III manpack, have you started to see interest in the user community that may have been buying PRC-117s or 115s over the past three years. The interested level in upgrading to the manpack Falcon III?

Yes. There is a lot... there is a lot of interest and the number one feature that they're looking at is this bandwidth, networking bandwidth capability that is in this radio. And the ability to develop a true networked situation awareness environment on the battlefield is of great interest to our customers.

Okay. Great, thanks and good job guys.

Thank you.

Next question will come from Steve Ferranti with Stephens Inc.

Hi, thank you. Steve Ferranti with Stephens. Congratulations guys on a nice quarter.

Thank you.

I wonder if you can give us an update on the Consolidated Interim Single Channel Handheld Radio, IDIQ. What kind of activity levels you are seeing there, maybe which branches of the military are most active there?

Well, we announced… we've announced some orders, at least one order in the press release. We see more proposal activity underway. It is primarily... the order we received is primarily Air Force. We expect additional procurements by the Army and perhaps down the road about by the Marine Corp. But, I think the Army is working on some right now.

Okay. And I guess following up on that, how are you seeing progress in terms of sort of improving your penetration within the U.S. Army and sort of prime [ph] them away from their radio record which [inaudible]?

Well, we were pleased to win the last procurement under that acronym Seizure [ph] contract with the Air Force. We're very optimistic as we go forward with the Army. I don't want to count those orders, Steve, until we receive them. But that contract was set up with a very high ceiling, lots of long term opportunity to do procurements under it and initially there are only two suppliers.

Okay. And last one from me. Does the weak dollar help you guys in terms of your competitiveness against perhaps the other supplier being that they are a foreign company?

Well, I think in general, the weak dollar helps us in competitiveness abroad. I don't know what percentage of their content is imported. I think most of it is made in the U.S, so I think most of those radios are U.S. dollar based. It’s certainly not helping us in our broadcast business from a cost standpoint in Canada. So our costs are going up in U.S. dollar terms. But we are getting some of the benefit at the sales line internationally and being more competitive against people like Talus and Rohde & Schwarz. So net-net I think it's helping, but I don't think in the radio... the tactical radio procurement area it's a major factor.

Okay. Great. Thanks for taking my questions.

Thanks, Steve.

From Collins Stewart we will hear from James Mcilree.

Hi. Thanks. Good evening.

Hi, Jim.

Yes I don't mean to knit-pick about this because obviously the results are very good. But it seems like every quarter broadcasting like '08 are just a little bit less than expected in the second half will be great. I'm just... I would like to understand why the second half will be better this time around.

Well, I think first of all our track record is that we are making improvements sequentially. I think the problem Jim is we are not achieving the guidance that we provide and that's the risk when you provide guidance. We are disappointed at that but I don't think one should lose confidence or lose prospective relative to sequential improvement. We are frustrated that we don't have as much visibility and headlights on especially the gross margins in those businesses as we seem to have in our others. We are working to try and correct that, but right now it kind of is what it is and rather than expect a lot of improvement in the second half our guidance I think you will find suggesting both of those businesses pretty modest improvement in the second half. And so we are going to work very hard on delivering that and trying to restore our creditability with our shareholders in both of those businesses. Having said that, $5 million in those is not going to move the needle on the company all that much and we are very pleased that in aggregate we continue to meet or exceed the targets that we've set.

All right. Have you incorporated any sort of economic slowdown into your thinking for the rest of fiscal '08?

No, I don't think we see a lot in the rest of our fiscal year, we have pretty good visibility Jim. I think we'll certainly make sure that we are paying attention to that as we move into fiscal year '09 and certainly to the extent that the U.S. stimulus packages don't take hold. We certainly would share... share concerns about that. The good news though is that in 2008 calendar year with the elections, with the Olympics and the Olympics is helping us in China as well as in the U.S. I think there are some mitigating factors that will help us in broadcast that have quite the same kind of general economic slow down even if there is a slow down in the U.S. Right now CapEx spending in microwave continues to be pretty strong. We are a little concerned in watching as I said this slow down in revenue in Europe, Middle East & Russia. We think that's a few accounts rather than any kind of a general trend. We will be paying close attention to whatever leading indicators we can find on both the commercial businesses but the second half seems to be in pretty good order.

Okay and last one. Gary, can you give us the ending share count, the shares at the end of the December quarter? And then what would the share count be at the end of March quarter, forget about the buybacks but just what would it be assuming the bonds that are put to you are put to you?

Basically the share count at the end of the quarter was roughly 137.1 million shares outstanding. We really haven't talked about where the forecast takes us but won't go down that dramatically just from the December quarter to the March quarter based on where our current thinking is on the share buyback. I did mentioned that we may be more aggressive in the [inaudible] accentuate May we haven't decided, we're not happy with where the stock price is at. We had set a plan to buy so many shares back during the year and we may be more aggressive in the third quarter. But right now we wouldn't expect that share count to go down dramatically by a few 100,000 at most between now and March.

Okay, great. Thank you very much.

At J.P. Morgan, we hear from Joe Nadol.

Good afternoon.

Hi, Joe.

Hi, like to start out on RF. I was just wondering, if you could give, Howard, a little more granularity if at all possible on demand. I guess in the second quarter specifically and we had an absolute blow out first quarter and you indicated the first half was good and I'm wondering what Q2 looks like?

What you mean by demand. Are you talking about orders or revenue?

Orders [ph].

As we said before quarterly orders, I do know much of our view because they come in big chunks, 500 million one quarter and 200 million the next quarter and 400 million in the next quarter. Half year over half year orders were up over the prior year, we think they will be up even more significantly in the second half versus second half last year and we believe we will reach a level where orders meet or exceed our revenue guidance for the year, that puts us in a position to have momentum coming out of the second half with those strong orders as well as excellent backlog to get off to a fast start in fiscal year '09.

And just kind of what I'm getting at is, looking forward into FY '09 I know you gave some pretty specific guidance in the press release, which is double digit growth and yet you had a backlog of about a billion… over billion in the last quarter, I'm assuming it’s right in the same… roughly the same level now. Your sales in this business are approaching $1.5 billion, so you have maybe eight months, nine months of backlog, which it's a fairly short cycle... shorter cycle. I am just wondering what really gives you that visibility, the double digit growth projection FY ’09, how confident are you in that?

Well, we're confident enough to say that's our expectation, it’s not like all of these orders were in-house to deliver all of fiscal year '09 Joe. But we believe, very strongly and very confidently that the drivers that I indicated, which are driving significant quotations and proposals in our pipeline not only from the U.S. and also internationally that that is going to allow us to achieve 10% year-over-year growth in fiscal year '09 or more. Obviously the proof will be in us delivering that, but we place a lot of value on our track record and our consistent performance. I think you have to step back when you think about this business and recognize that our business model gives us a significant competitive advantage. We don't have to wait two years for the Government to decide what the specs are in the next radio and then two more years to provide the funding and then three more years to do the ST&D phase. We are able, we think very successfully to identify where the market is going and to get there ahead of competition with a radio that works, has significant reliability to perform its mission critical function and to therefore create a significant reason like customers, how to buy our radios and we have seen it over and over again during the last several years. So, I believe in our ability to continue that and even though we are a bigger business now in [inaudible] than we were two or three years ago, we significantly expanded the markets that we are serving. And in terms of the VHF, the multi-band hand-held market and now new radios like personal roll radios, high capacity line-of-sight radios and the whole defense systems opportunity. We will be updating the chart that we…

Fair enough. I wasn't trying to pick quarterly numbers, I was just trying to get a sense of [inaudible] that's very helpful, thanks. The only one minor I would ask for, if you can give it on '09, is your gut feel for that double-digit growth, do you feel like domestic will grow faster or more slowly than the international or is it too early really to tell.

We are just beginning that process in fact this week of looking at 2009 and beyond. So I think we will have a lot more color on that in our next call. But we have said in the past, that we expect over the next several years to see a strong growth in both domestic and international markets, but we have said we expect international markets to grow somewhat faster. And... but we will get a chance to talk with our management folks about their view... their current view on that this week and we'll certainly be talking with you all in the next call about them.

Okay. Thank you.

From C.L. King we will hear from Barry Harris [ph].

Yes. Thank you and good evening. To go a bit deeper in terms of the broadcast revenue outlook, is HDTV and the digital transition, I assume that that is driving the decision to go with, I think higher revenue guidance and any commentary you can provide in terms of what's happening in the radio market right now?

Yeah mostly where we have taken our guidance up, compared to our prior view Larry has been in the Video Infrastructure and Digital Media, part of that business. So that is primarily the former leach [ph] technology product line, servers, routers, power distribution amplifiers, graphics, multiviewers, master control systems as well as the video servers. So that's where we continue to see even stronger, very strong growth. Overall, where we will get the pump in the second half in revenue growth though is the turnaround from shrinking in the transmission business in the first half, so starting to see some sequential growth again in the second half. So all in all that that top line profile looks pretty good, lots of order opportunity in the pipeline both domestically and internationally. Several pretty big deals out there that we hope will fall, and more importantly fall to us, as we go forward in the year. We got to get equally robust though on the gross margin line, and if we can do that, then we are going to really like the margins in this business. But we are pretty confident margins should be better in the second half than the first half, and we need to get on track to that double-digit margin return on sales that we have committed to for a while.

So you're saying the station's upgrading from low power to the full power?

Yes. And the orders have looked really quite good Larry, and there's no one that I have spoken to, who questions the deadline of February '09 being real, there is just no discussion about that. Obviously you heard or read some very good potential coming at our transmission also at the CES show as we talked about mobile television and we're not putting any numbers on that at this point, but we are certainly going to be talking more about that later. I was personally out at that show and personally met with a number of executives and our customer base, and there really is a lot of nice potential in that business for us to capture, in terms of helping customers upgrade, so they can do that, that mobile television broadcasting using there Harris Exciter. So I am cautiously optimistic on that, and we hope to talk to you more with more definitive outlook on that in the coming quarters.

Any comments on the radio market?

The Digital radio.

Oh digital radio, I'm sorry, I'm the only one not understanding your question. No, you know continues to roll out with the stations, but the roll-out continues to be now over a long enough period of time that we are not seen huge year-over-year growth. Our market share seems to be solid, we have put ourselves back in the number 1 position and it’s good business at margins. But it's not going to drive, we don't think this business now that we are at a well over $600 million for the segment. It’s a driver, but it's not a big driver.

All right. Well thank you.

Operator we have another question we will take it.

All right. Final question comes from James Mcilree with Collins Stewart.

You had a $4.2 million in other income this quarter, which is little bit higher than usual, what's... what has happened this quarter, does that go on to the next quarters too?

Let me answer that Jim, this is Gary. The increase was primarily due to a $5.6 million gain related to a mark-to-market adjustment on warrants of shares to... I should say to acquire authentic shares, and our total share position now in authentic is about $3.6 million. I think total market value at today's prices is roughly $47 million and our carrying cost or our basis is roughly $17 million. So there is about $30 million at current prices where there is a gain in those shares We haven’t made a determination today exactly how we will liquidate that position, but it's fair to say that we won't be long-term holders of the stock and we are going to look at how we best deal with that.

We don't... at this point as warrants, I think the mark-to-market kind of took care of that… that accounting Jim, so we are not expecting significant non-operating income in the second half of the year at this point.

All right, but you do have a $30 million, if that price stayed the same you'd have a $30 million gain to book at some points?

Yes.

Right?

That is accurate, yes.

Okay. And so and just to make sure so the second half other income is somewhere around this $2 million per quarter, $4 million per quarter.

No the second half non-operating income included in today's guidance is essentially zero for the second half coming from non-operating income sources.

Okay.

The gain in the second quarter really was a result of this marked-to-market. We did exercise the warrants in the second quarter. So the only income we would have with BSF, is we sold the shares.

Right, right, okay great. And I am sure Pam has told you about how the markets responded in prior times to using that to make the numbers. So I'm glad it zero in your guidance.

Understood.

Okay. Awesome, thanks a lot.

Thanks for asking and allowing us to clarify that our guidance does not include any non-operating income to achieve the increased earnings per share.

Well thank you everyone for joining us and let me know what else I could do for you.

Ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation. Have a wonderful day.