Good day everyone and welcome to the Logitech second quarter fiscal results conference call. At this time all participants are in a listen-only mode. We will be conducting a question-and-answer session towards the end of this conference and instructions will follow with that time. (Operator instructions) I would like to introduce your host for today's call Mr. Joe Greenhalgh, Vice President of Investor Relations at Logitech. Mr. Greenhalgh; please go ahead, sir.

[Audio Break] Presentation slides are available online at logitech.com. This conference call will include forward-looking statements that are being made under the Safe Harbor of the Securities Litigation Reform Act of 1995, including forward-looking statements with respect to future operating results. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from that anticipated in the statements. Factors that could cause actual results to differ materially include those set forth in Logitech’s Annual Report on Form 10-K dated May 30, 2008 the subsequent fillings available online on the SEC EDGAR database, and in the final paragraph of the press release reporting second quarter results issued by Logitech and available at logitech.com. The press release also contains the company financial information for this call. Forward-looking statements made during this call represent management’s outlook only as of today, and the company undertakes no obligation to update or revise any forward-looking statements as a result of new developments or otherwise. I would like to remind you this call is being recorded, including the question-and-answer portion, and will be available for replay on the Logitech website. Those of you just joining us, let me repeat the presentation slides accompanying this call are also available on our website. Joining us today are Jerry Quindlen, Logitech’s President and Chief Executive Officer and in Fremont, Mark Hawkins, Senior Vice President of Finance and Information Technology and Chief Financial Officer. I’d now like to turn the call over to Mark.

Thank you, Joe. Let me start with an overview of our Q2 performance. We delivered double-digit sales growth in what has become an increasing challenging environment. Our sales grew 12%, reaching a record high for Q2, with a growth led by OEM in Asia. Our sales growth was restrained by 11% decline in the Americas. Our operating income was essentially flat compared to the prior year the 6% growth in our gross profit was outpaced by the 9% in our operating expenses. We ended quarter with $459 million in net cash and we generated $40 million in cash flow from operations. Gross margins, our gross margin was 34.3%, it was up 20 basis point sequentially, but down from 36.3% last year. The gross margin decline was primarily due to a combination of two factors; one, higher labor and material input cost and two, more OEM sales in the overall sales mix. Let’s turn to operating and net income. The sales decline in the Americas was a major factor and our flat operating income. The September quarter is typically our most back-end loaded quarter of the year and the extent of the weakness of our sales into the channel in the Americas did become fully evident. Until the last month of the quarter, as our channel partners reacted to the softening economic conditions. As soon as we became aware of the situation, we took the appropriate steps to moderate our spending across the company. The impact of some of these actions to moderate our spending was evident in Q2, which have the lowest growth rate and more than three years, but because it was relatively late in the quarter, we were not able to achieve complete alignment, between our operating expense growth and our gross profit growth. The full effect of…

Thank you, Mark and thanks again to all of you for joining us. On balance, I’m pleased with the company’s performance in Q2 and particularly with achieving double-digit sales growth and orders becoming increasing challenging operating environment. There were a number of highlights during the quarter. Starting with sales, it was great to see us deliver our best quarter ever in OEM. We also continued to see a very strong growth in Asia, with our fourth consecutive quarter of growth in excess of 30%. When you add in the growth in EMEA, we more than offset the decline in the Americas. This is a compelling example of the resilience of our geographic and channel diversification. Remotes, was our fastest growing retail category, what I was most pleased with in this category was the rapid unit growth. With units growing nearly three times as fast to sales. This is a clear indicator the demand in the category remained strong. I was also pleased to see the continued double digit growth in EMEA as well as accelerating momentum in Asia. We delivered double-digit growth in pointing devices, with the majority of the growth driven by our sales of mice for notebooks. We continue to leverage the opportunity provided by the popularity of notebook computers, at sales of our family of notebook peripherals increased by 24% compared to the prior year. Another highlight for the quarter was our successful launch of our large number of new products. The operational and logistical complexicity associated with the worldwide rollout of many new products across multiple categories is significant and our ability to manage this complexity with the major neighbor of our top line performance. I was also very pleased with our ability to deliver a gross margin of more than 34%. The decline in our…

(Operator instructions) Your first question comes from Jonathan Tseng with Merrill Lynch. Jonathan Tseng – Merrill Lynch: Two questions, one of your guidance base in you get your whole back when your S&M and your OpEx quite a light lot in can I just see that’s what you’ve done the past plenty key is to give (inaudible) out some of the actions you have taking on the sales and marketing and the G&A side, and my second question obviously very strong OEM sort of things I guess probably you still have a partly Asia from the looks of it. How sustainable is this, did it going this business carry on a similar kind of run rate in next quarter or it was lumpier than that? Thanks.

Hi, this is Jerry and thanks for your question let me make sure I got the second part, you are asking about Asia and the sustainability of the… Jonathan Tseng – Merrill Lynch: Yes, the sustainability on the OEM side of business given by the microphones and games?

Yes thank you, yes no problem thanks to clarifying. Yes I will start with the second part we’ve had an unprecedented and a traffic first half in OEM driven by microphones mostly we grew about 38%, when we started the year we expected OEM to grow, we said that it would grow less than the original company target, the overall growth of 15% and obviously, we’ve gone well beyond that, we are very pleased with that, but as I look at it, the comps that were coming up against in the second-half make it much tougher to sustain that growth. So, as we’ve modeled it going forward, I do continue to expect OEM to grow in the second-half, I do not expected to grow at that 38% rate. In terms of OpEx and the places we will go for in the reductions, the first place that we look to restrain the growth of OpEx frankly is in keeping our headcount flat or increasing it very minimally, we are a growing company, we tend to add people and that’s a good time, that’s a healthy time, but the best place that we can go to keep our OpEx under control is restraining headcount we planned to do that. The second thing is that, there is a lot of places in G&A, where we think we can get savings and we started to see some of the effect to that as Mark said in his comments towards the end of Q2, we began to trail it back, you know this is just one example but we’ve dramatically restrict that our trailing entertainment for the balance of the year and we take another steps. Jonathan Tseng – Merrill Lynch: What does whole back on sale growth teach you revenues growth for Q4? Is there a penalty to be paid there on the sales and marketing costs?

I’m sorry, John can you repeat the question? Jonathan Tseng – Merrill Lynch: What does holding back sales and marketing cost imply from revenue grows in the holiday shutting seasons it’s a penalty to be paid there?

No, the targets that we shared for the second-half on both operating expenses, the assumptions we made on both operating expenses and the revised targets, are consistent. So, we believe that with the spending plans we have in place, we can achieve the revised targets. Jonathan Tseng – Merrill Lynch: Thanks.

You’re welcome.

And for our next question, we go to Manny Recarey with Kaufman Brothers. Manny Recarey – Kaufman Brothers: Hi, Mark, hi Jerry.

Good morning Mann. Manny Recarey – Kaufman Brothers: In the guidance, you were saying there was 6% to 8% on the top line, but aren’t you’re going to be really focusing on managing your costs. So, what’s going to be driving the operating income growth being lower than the revenue growth?

Yes, it’s really two things Manny, I mean first of all, it’s the lower sales overall and the other thing as I mentioned in my comments, while we were restraining operating expense, particularly and things like sales and marketing and G&A. We do not plan to restrain the growth of our investment in R&D. So, we lose a little bit of the leveraging effect there. Manny Recarey – Kaufman Brothers: Okay, and then, if you could talk a little bit more about the audio sector. I know you told, that you had some products gaps there, but was it driven more by the products gaps or there was weakness in that sector, on an industry level?

Yes, now it’s really product gaps and it’s not really any different from what we saw and shared in the Q1 call. It’s not a competitive issue, we’re not seeing the category contract, it really is related to product gaps and it is across all of the segments. There is really three segments we always talk about, we call the 5.1 segment that means five speakers and a subwoofer, 2.1 is two speakers and a subwoofer and the 2.0. We have gaps in the upper segments the 5.1, 2.1 mainly because we have some products that had performed very well, but truthfully they are tired and we need to refresh them and we have plans to refresh them, but our refresh plans won’t full take effect really until the end of this and even the first quarter of 2010. The 2.0 segment as I said in my remarks, is the fastest growing segment in speakers and we’re really just starting, I think to booster our line up there, there is a lot of competition in that segment. We’re getting our first share, but we had some gaps we launched the products that I referred to our earlier call the Z-5 omnidirectional speakers, that I think it’s going to do very well, but it is a really a product gap issue, meanwhile other parts of audio are performing well, where the Squeezebox line is doing very well as Mark said in his comments, I’m quite pleased with that, I’m very optimistic about what Ultimate Ears of the earphone lineup will do. Our PC headsets had a good quarter, so really it’s an issue of PC speakers. Manny Recarey – Kaufman Brothers: Okay and then just one more question I could Mark, the gross margin in the September quarter was impacted by two issue the product mix and the higher input cost. Could you give me any color on, which has a bigger impact or is it bit both impact the gross margin by a similar magnitude?

I think they were pretty close to be in the somewhere Manny be it was sales mix just to be clear with the proportionality of OEM being significantly higher this quarter than it was in the comparable quarter last year. The second think, the input cost again it was on a similar kind of magnitude if you will. Manny Recarey – Kaufman Brothers: Okay, thanks.

You bet.

Thank you.

And for our next question we go to Andy Hargreaves with Pacific Crest Securities. Andy Hargreaves – Pacific Crest Securities: Where there any material changes to the channel marketing expenses in the quarter?

I would say no.

Mark and I want to if you want to comment, I don’t believe they where, I would say no as well. Andy Hargreaves – Pacific Crest Securities: And are there any expected for the rest of the year, does that change it all with this kind of environment?

There is some seasonality, just as a course. Our channel marketing activities are above the line and the gross to net Andy, but I wouldn’t call at anything particularly significant. Andy Hargreaves – Pacific Crest Securities: Okay. And then just in terms of your commentary about having not seen an improvement so far in October, as you got worse in October and then also just as a point of clarification are you talking about selling there or sell through?

Andy Hargreaves – Pacific Crest Securities: Okay great thanks

You’re welcome.

We will go next to Thomas Schneckenburger with UBS Thomas Schneckenburger – UBS: Four questions. First questions is on your guidance, what FX assumptions you have a put behind that your assumption because you said there quite a detailed modeling behind, so did you based in a FX for the year or do we still have a solid…

Let's take him Thomas if we may one at a time I now you got a few we are just kind of bang those one at a time there. First off outline our guidance our targets for the fiscal year, the bigger overarching factor that we looked at for sure and Jerry is calling this out as the economic uncertainty and in particular our channel partners response to that, as Jerry said sell through it was decent and it really it’s the economic environment in the retailers reaction to that’s a single biggest factor that went into our look at and our guidance and obviously we then assimilate a lot of other assumptions in the secondary assumption we’ll have to do with foreign exchange we put in some reasonable assumptions there and but that’s clearly a secondary issue relative to the bigger picture. Thomas Schneckenburger – UBS: But you cannot comment if it was zero FX pros assumptions and if …

I am not going to go into that level of detail Thomas Schneckenburger – UBS: Second point goes in the similar way could you try to quantify what the external gross impact is like from Ultimate Ears or WiLife which could provide a bit of confident at some of the gross than stronger from new small bolt-on acquisitions you made?

Well I could make the comment, Thomas I see a very nice momentum from all three of our most recent acquisitions, so the Slim Devices or the Streaming Media business unit our WiLife and Ultimate Ears. Now Ultimate Ears is just getting started, we had a very minimal impact in the current quarter, but all three of them are performing very nicely now the base is very small, but we’re very optimistic and very pleased with the progress that we made with all three of them, I mean Ultimate Ears I can’t say that yet, because we’re just getting started, but with Slim Devices and with WiLife, we’re very optimistic and I’m optimistic about the long-term impact of Ultimate Ears as well. Thomas Schneckenburger – UBS: Then the next question would go on like your inventories, because inventories were up quite substantially, is it the case that there is some kind of consignment stocks that you’re at your retail partners that you sell to them, but they weren’t able to sell them through and this is why your inventories went up and you’re only get paid, or you can book it as revenues as soon as they sell it? Could you…

Not at all, we do not do consignment with any retailers. There is two factors drove our inventory higher, and I think Mark commented on them during his portion. Number one and by far the biggest one was you know this late quarter fall-off in the Americas, we build products to that we expected to sell in Q2 and retailers begin cutting back when they saw what was happening in U.S. financial markets and as Mark said, it’s a very, very it’s the most back ended or least linear quarter that Logitech has that was the number factor, by far there was a secondary factor smaller an overall impact we had some inventory associated with the quality issue from a supplier. It was a chip supplier, we had to rework that inventory, frankly that’s already essentially been dealt with. So, it’s not an issue we have to deal with going forward, but the primary one was the Americas sales shortfall. Thomas Schneckenburger – UBS: Okay, no consignment.

We do not do consignment. Thomas Schneckenburger – UBS: Okay, great and then the last question is on your other income component, which is lower than the previous quarters, could you remind me please what that is and…

Yes, well with the circumstances there Thomas is last year we took a foreign exchange gain and we did not have that this year. Thomas Schneckenburger – UBS: Thanks a lot.

Thank you Thomas.

We’ll go next to Robert Sanders with Dresdner Kleinwort. Robert Sanders – Dresdner Kleinwort: Yes, hi, guys maybe if you just first question on the gross margin, you have seemed to be assuming that your gross margin will head up towards around 36% in this in the December and March quarters, but that means that is in the context of the slower sales seemingly weaker mix and maybe a bit of adverse FX impact. So, is that something that you’re looking at gross margin similar to sort of last year in the second half?

Let me just speak to this Robert that first of all I actually take a different point of view here for either the gross margin number that you need to think about for the fiscal year is the target that we putout the beginning of the year and we continue to reiterate it is sort of be above the range of our long-term business model. Our long-term business models in the 32% to 34% range, that’s the information that you should use an operate on when you look at your numbers. Robert Sanders – Dresdner Kleinwort: Sure, but you are I mean are you therefore saying that your OpEx will decline in the second fiscal half versus last year?

What I want to color out to you is gross is not the end game. The end game is driving revenue growth and operating income, that’s a really kind of key philosophy for us Robert that we’ve continue to reiterate every chance we get, gross margin is tool for the end and so what we always provide targets on typically as the top line and the bottom line. We just happened to give you also a 15 years view for gross margin. Robert Sanders – Dresdner Kleinwort: And just second question on the blended ASP, I mean that seem to decline for the first time and above that, I think 10 or 11 quarters. I mean what are you expecting for the remainder of the year, are you seeing any mix effect with consumers trading down for example within your portfolio?

Well, first of all, we’re actually pleased; that there was a slight decline in ASP year-on-year was down minus 3% and we are actually pleased that the retail level to see the units growing slightly faster than the revenue, so we think that’s a good sign in terms of penetration first and foremost. Secondly, in terms of the trading up and trading down, it’s interesting I was starting, there is a whole variety of different examples, which really mixed Robert, to be perfectly, honestly do. We saw for example Cordless Desktop MX 550 Revolution is more of a high-end, did well Wave Desktop Pro did well and the keyboard side more high-end. WiLife, Slim devises, remote controls, VX Nano, even our QuickCam Pro 9000 or even in game in our GT Driving Force Wheel. Those are all towards the high-end products that actually did quite well. In Q2, we have other examples with the low-end we are very pleased to see some of the performance in our corded mice, as well as for example our V220. So, I think it’s really a mixture, but overall we are actually encouraged to see the unit growth. Robert Sanders – Dresdner Kleinwort: Okay and thanks a lot.

Thank you Robert.

We will go next to Michael Foeth with Bank Vontobel. Michael Foeth – Bank Vontobel: Yes, hi gentlemen I have a several questions. Let me start, first of all that the decline in sales in the U.S., is that across all price bands or is there is some granularity that you can provide?

Hi, Michael. It was primarily concentrated in couple of pockets and the biggest one was audio and both Mark and I spoke to that in our comments. We did see strength in the number of key categories in the U.S. for example we have good unit growth in Harmony remotes, which is up 22%. Our revenues were flat that’s because we were comparing against the sales of Harmony 1000 a year ago, but the Harmony was very strong in the U.S. as an example. Even with this sort of late quarter issue that we dealt with it was primarily, I mean it was going to single out of weeks, it was audio. Michael Foeth – Bank Vontobel: So, you can’t say whether it was expenses products that let the decline or rather…

No, I would actually go back to something, Mark was saying, which is now this is not U.S. statement, but it’s for total company. For the first half of the year more than 80% of our products were sold below $100 and we did quite well, we did very, very well in mice and keyboards in the $19 to $49 range. We saw a very strong growth in just about every region. So, no I don’t think there is a conclusion or I think it will be wrong to draw a conclusion that it was one particular trend. Michael Foeth – Bank Vontobel: Okay, the second quarter, would be regarding wage inflation. Can you quantify how much wage inflation you are seeing and how you addressed that problem?

Michael, I can’t give you a specific quantification, obviously there is different regions of the world manufacturing aspects and then there is the OpEx aspects around the world. I can’t give you a specific quantification that was a factor that we experienced as part of the input cost pressure that we had in the cost of goods sold. Michael Foeth – Bank Vontobel: Okay and then maybe just follow-up. Can you give us some update and how you brand building program is going the most promote story is that still running at full speed or as you will hold back on that?

No, we have to do that’s running at full speed and we’ve made the initial investments there Michael and the investments were largely around creating an organizations not a huge organization, but creating an organization of people and I would say a lot of training within the company and then thirdly processes. So, we now have processes where every new product gets an MPS score and is compared to the product that it’s replacing. So, I would say in general that process as well established with us now and as we manage our expenses very tightly for the second half of the year that’s not the kind of think that’s in jeopardy or that we would cut back on. Michael Foeth – Bank Vontobel: Okay and then just finally, are you seeing any areas where your market shares going down or are you maintaining your market share in this crisis?

In general, our market shares are very good and very stable. We have so many categories in so many markets, we always have dynamics. We’ve shares going up, shares going down, but I can say in general, we feel very good. For example on Asia, we’re doing extremely well in just about every product category, we’re growing and we’re growing share and I will say that as top as we see the second half outlook being, we see this is a great opportunity and take share from weaker players and we will do smart things to do that. So, we expect to come out of the difficult say next couple of quarters with even stronger market shares.

We go next to Tavis McCourt with Morgan Keegan. Tavis McCourt – Morgan Keegan: A kind of delved into PC speakers a bit. I was wonder, if you could delve a little bit into the keyboards and desktops that were also down. Was that more of a channel inventory issue? Or is sell-through there being impacted by some kind of new competitive dynamic?

Not at all, Tavis. In fact, I would say there is really two things there; one, we called out during the remarks and that was in the Americas, we did see a decline in particularly in cordless desktops. Now some, like some of our higher-end desktops, I think Mark said, we did very, very well, but in general, we saw pretty steep declining Americas and we believe that was related to this overall late quarter weakness. I think there is another dynamic going on, that I’m not particularly concerned about it and glad to ask the question because it deserves a little bit of discussion. Desktop declined overall, but as we called out, we have a record quarter in standalone keyboards. We believe what’s happening right now is, we are giving consumer an unprecedented set of choices around standalone keyboards. We have a lot of innovative keyboards out there; we just introduced a number of new ones like our new Illuminated Keyboard at $29. So, we give them the choice to buy a standalone keyboard and then buy a mouse right then and there or later on. Truthfully, we are in difference, whether they do it that way and sort of create their own bundle, is the way I like to think of it versus a desktop, which is a bundle we’ve prepackaged for them, if you want to think of it that way. So, in fact we had a very healthy record quarter in standalone keyboards and a very strong quarter in mice up 16% and 25% in cordless mice is very reassuring to me. So, if consumers want to choose on their own, I’m fine with that. We had this other dynamic with cordless desktops particularly in U.S., I don’t think it’s particularly concerning we’ll watch it, but that’s really what I think is going on in that space. Tavis McCourt – Morgan Keegan: Okay it makes sense and then if could kind of differentiate between the Americas and EMEA are in a what’s that more surprising whether Americas just down so much of that EMEA wasn’t down given that it seems like the consumer environment pretty similar in both geographies. Is it that you are not seeing the channel inventory declines in EMEA is that you just don’t have maybe audio issues in EMEA that you have in the U.S. and kind of what you’re factoring in for channel inventory readjustments in that geography in holiday season?

So, let me differentiate between, what I saw in Q2 and then what we’re saying about on a go forward basis. I was very happy actually with our EMEA performance in Q2. Revenues are up 8% and units were up at very healthy 13%. Just about every category was healthy, the sole kind of weak spot was audio and once again there was really related to PC speakers. I think we’ve talked about that, it’s a fairly narrow and isolated problem and we really believe we’re taking a right steps to fix that. So, we’re very pleased with that 13% unit growth. We just launched digital video security as Mark said, so that provides upside. Harmony continues to grow nicely, so a lot of good momentum. The concern we’ve got is that the things we talked about with the Americas and particularly the retailer caution that were already seeing in the Americas. We do believe that we’ll start to see that in select markets in Europe in the second half; not every market and we don’t necessarily think it will be to the same degree as in the U.S. So, markets are like the U.K. and France and Spain; markets that are also seen housing bubbles and are facing credit problems. I think we’re going to see similar issues with consumer psychology and that’s going to translate into retailer caution and we’re reflecting that in the outlook, but there is other factors in EMEA that make us a little more bullish versus the situation in the America. One is the brand, we have a stronger brand in Europe, then we do in the Americas, we’ve just been doing business there longer. It goes back to our European roots and frankly the second one is, unlike the U.S. or unlike AMR where you have a certain monolithic market, one big market the U.S.; Europe is much more fragmented, we have the merging markets, in Europe they are doing quite well. Our business in Middle East and Africa is excellent, it’s frankly on fire. Russia is doing quite well; Eastern Europe is doing quite well, so we have some buffering factors there, Tavis. So, I do think we’re going to see some of these concerns that have start to play on the Americas, reached certain markets in Europe that’s reflected in the revised targets, but I was happy with Q2 and there is some of the reasons why I think that two markets will be a little bit different.

Your next question comes from Bennett Notman with Davenport & Company. Bennett Notman – Davenport & Company: Couple question for you. First with some of the difficulties what retailers like Circuit City are having? Are you having any debt collection issues or what’s the quality of receivables look more relative to the passed?

Let me just speak to that Bennett. Just generally speaking in terms of our bad debt expense we have not seen any unusual trends heretofore. We are extremely diligent and managing our credit situation right now as you might expect. Circuit City is a customer of ours and certainly that would mandate that we are very, very careful on the receivables in the payment terms as it relates to them, but we have not incurred any unusual bad debt expense at this stage. By the way just a last point, we do use credit insurance in most parts of the world as well. Bennett Notman – Davenport & Company: Okay and would you disclose, how significant a customer Circuit City is?

I won’t get into real specifics they’re a good customer, certainly not one of our biggest, but they’re a good customer and believe that it done. Bennett Notman – Davenport & Company: Okay and then to the extent that you’re seeing retailers less willing to hold inventory, do you think that’s a reflection of their lack of access to credit, we’re really just caution on the consumer environment?

I would described as the latter, Bennett its caution. I guess, for some retailers it could be credit, but I think the broader answer. I think the most applicable answer is the second. I think it’s a general sense of caution and they’re concerned about what’s the consumer state of mind and are they going to shop things like that. Bennett Notman – Davenport & Company: Okay and then on given that, you have the slowdown at the end of the quarter and that drove a little bit of an uptick in inventory. Do you think we’re going to see your inventory build in the next quarter or two? Or have you been able to adjust your manufacturing pipeline for that already?

Yes, what I would say on that one is that certainly, yes Q3 is the biggest quarter the year for us. So, it’s a good opportunity to go ahead and work through just some of the transitions in the inventory that you already talked about and we feel confident that our team is on that and working that yield, so called out one our unique one-off item that will be work through by the end of the quarter. So, we think the inventory is fresh and we will adjust accordingly. Bennett Notman – Davenport & Company: Okay and that I understand then that you guys on the OEM side, you would expect the OEM percentage to stay roughly where it was in the current quarter and therefore that might sort of keep gross margin going forward roughly it was in the currently quarter?

I don’t think we said that and if you construed that’s not right. I mean what I said, I think in answer to the very first question was, I was asked about what do I see, what do we see for OEM going forward. OEM grew 38% first half of the year, which was spectacular. I do not expect it to grow 38% in the second; I do expect it to grow for the full-year. We’re coming up against the beginning of the comps that included microphones in the second half. I’m not going to be a specific figure, but I expect OEM to be healthy in the second half not grow at 38%. Other than, I’m sorry I can’t give you more specifics.

Your next question comes from Simon Schafer with Goldman Sachs. Simon Schafer – Goldman Sachs: Just coming back on this geographic points and under a scenario whereby the European region actually slows more significantly and the same is the case for let’s say Russia and Eastern Europe and how much more sales decline should we bake in under scenario whereby that happens? I seem to understand that perhaps your projection doesn’t include such a scenario, just trying to get a sense just what the potential haircut could be in case those regions also slow down?

No, Simon I think you misunderstood. Let me just clarify that’s the revised targets that we have today factor and everything we can see today and obviously it’s a very difficult situation not only for Logitech for a lot of companies to assess. In terms of the state of consumer, retailers state of mind, we do believe that the U.S. will be a very challenging market for the entire second-half and that we’ll see some of that begin to affect Europe, particularly the retailer cautiousness, not all of Europe, we are not projecting a slowdown in Russian places like that, but the targets that you have reflect everything we can see and we’re in the biggest quarter of the year, so we’re going to know a lot more about all of these things as state of the consumer, of state of retail at the end of the December quarter. Simon Schafer – Goldman Sachs: Understand, but I think your comments also said, you don’t expect the European consumer to get as bad as the U.S. Hypothetically, I know we can’t really see it today, but on a scenario whereby that happens to the European consumer is there another shoe to drop by I just want to make sure on I’m not missing something here?

No, you not miss any. In fact, our assumptions assume that in a number of key markets in Europe that we see a very similar dynamics with the U.S. consumer. In a number, we did not assume that with a same in every single market and we also think we have something that’s going in our favor like, just a general level of momentum in emerging markets that the stronger brand will helps us more than it helps us in the U.S. that’s really what I was trying to say earlier. Simon Schafer – Goldman Sachs: Okay and my second question would be, just recalling from memory the gross margin and your retail business it’s somewhere between 10 and 15 points perhaps lower, sorry higher than it is OEM. Is that still the case I’m just trying to get a better sense as to what the gross margin sales could be?

Yes, Simon let me speak to that. First of all, I want to confirm the ratio that you had, but let me say something differently. Let me just give you the range from a kind of a different context. Clearly, OEM is one of the lower gross margins in the company and then we have something so they’re more towards the higher end. It is towards the lower end, but I will not confirm the range itself.

And with our final question, we go to John Bright with Avondale Partners. John Bright – Avondale Partners: Batting cleanup, I guess on keyboards Gerry and Mark they were down 5% year-over-year are you seen any negative indication or do you have any concern that the shift from desktops and laptops might be impacting keyboard sales.

John, its possible that there is some impact but at this point now we have been we don’t really said we see that consumers are continuing to buy keyboards and we don’t believe those are all going to desktops in fact, we have some evidence that there clearly not, there record sales that we add in the quarter for keyboard of 19% we know have lot of that people buying sort of a more comfort keyboard we call it with there notebook computer. John Bright – Avondale Partners: And then on gross margins can you remind us what percentage have you manufacturing down source number one and then number two I assume Mark you’re assuming that you baking in your expectation that higher input cost from labor particular in China is going to continues that fair.

John first of the outsourcing it continues to be roughly 50-50 50% internal 50% external so that’s the first answer to your question and what we have done in our targets for the year’s we have factored in all that we can see including some of the input cost on labor in China into our target so I think its sort of see we have consider that in our targets. John Bright – Avondale Partners: Last question then inventory is been at quite bit of discussion on the call in the U.S. anyway you would characterize how lean the inventories are at this juncture from what the information data point you gotten.

Well first realize what I was trying to convey is that we feel our inventory fresh Gerry has called out one of the issue that we add a specific rework but we had the whole inventory due to a vendor issue and that’s being work through in Q3 we had a few bids of inventory in the Americas didn’t shift because we add the cautious it Gerry talked about from retailer at the very end of the quarter. This is all fresh inventory where head right into to biggest quarter of the year were end now and we think we are going to move that so inventory I am fine with John just to be very clear.

That’s okay. I thought as Mark (inaudible) no problem I think as we look added John in the own surprise you at all if you look at the various retailer we deal with and how they go to market there individual aims are targets for inventory are all over the map there are some who are able to operate it three weeks channel inventory that’s normal for them so cutting back when weaker is the big deal down two there are other in retailer source simply not a sufficient that you have to operate on it like say low double-digits. The point is there all cutting back regardless of what there starting point is there all cutting back when managing and more aggressively and its not even just what they keep on hand but its other thing that are important at this time year like what’s typically called off shelf display. So, good that they bring in promotionally to put on end cap so there much tenure I would say and not just with us, with everybody in terms of how they managing that so it really its different retailer by retailer but they comment and denominator is there all managing it much more tightly.

So, it's very lean in the channel. John Bright – Avondale Partners: Yes. Gentlemen thank you

Thank you, John.

And with that ladies and gentlemen we will conclude our conference call for today. We do appreciate your participation and you may disconnect at this time.