Good day, ladies and gentlemen, and welcome to the Insight Enterprises Incorporated fourth quarter 2007 earnings release. My name is Lisa, and I will be your coordinator for today. (Operator Instructions). I would now like to turn the presentation over to your host for today's call Ms. Glynis Bryan, Chief Financial Officer. Please proceed.

Thank you, Lisa. Welcome, everyone, and thank you for joining the Insight Enterprises conference call. Today we will be discussing the company's operating results for the quarter and full year ended December 31, 2007. I am Glynis Bryan, Chief Financial Officer of Insight Enterprises and joining me is Rich Fennessy, President and Chief Executive Officer. If you do not have a copy of the earnings release which was posted this afternoon and filed with the Securities and Exchange Commission on Form 8-K, you will find it on our website at insight.com under our investor relations section. Since detailed financial and operating data are contained in the earnings release, we will only be concentrating on highlights of the quarter and full year during the scripted portion of the conference call. As usual, at the conclusion of the scripted portion, we will answer questions from our conference participants. Today's call, including all questions and answers, is being webcast live and can be accessed via the investor relations section of our website at insight.com. An archived indexed copy of the conference call will be available approximately two hours after completion of the call, and will remain on our website for a limited time. This conference call and the associated webcast contain time-sensitive information that is accurate only as of today, February 6, 2008. This call is the property of Insight Enterprises. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Insight Enterprises is strictly prohibited. Finally, let me remind you about forward-looking statements that will be made on today's call. All forward-looking statements that are made in this conference call are subject to risks and uncertainties that could cause the actual results to differ materially. These risks are described in today's earnings release and also in greater detail in our Annual Report on Form 10-KA for the year ended December 31, 2006 and subsequent reports on Form 10-Q. Insight Enterprises assumes no obligation to update and does not intend to update any forward-looking statements. With that, I will now turn the call over to Rich for opening remarks. Rich?

Thank you, Glynis. Hello everyone, thank you for joining us today. I am very pleased to announce that the overall performance of our geographic operating segments produced a solid fourth quarter, which provided a strong ending to a successful 2007. As expected our business delivered seasonally stronger fourth quarter and for the full year our overall financial results exceeded our own internal expectations. Specifically our consolidated fourth quarter net sales were $1.28 billion, a 5% increase over the fourth quarter of 2006. While net earnings from continuing operations were $23.8 million, a 29% increase year-over-year. Additionally diluted earnings per share from continuing operations grew 30% year-over-year to $0.48, from $0.37 in the fourth quarter of last year. Our acquisition of Software Spectrum, closed in September 2006, so our fourth quarter 2007 and 2006 consolidated results reflect a full quarter of that business on a year-over-year basis. Our strong financial results in the quarter benefited largely from the strength of our EMEA and APAC geographic performance, as well as our software and services category performance across all geographies. Our North America hardware category struggled with growth in the fourth quarter, primarily driven by a challenging demand environment within our client stat and some internal sales execution issues. For the full year 2007 our consolidated net sales were $4.8 billion, a 34% increase over 2006. Our gross margin on these sales increased to 13.8% from 13.1% reported in 2006. Earnings from operations increased 25% to $126.1 million from $100.5 million in the prior year and reported net earnings from continuing operations grew 13% to $72 million from $63.7 million in 2006. Please recall that these 2007 results include expenses of approximately $15.6 million or $9.4 million after tax related to stock option review and severance and restructuring charges that we incurred in…

Thank you, Rich. Starting with North America. The North America net sales decreased 4% from $880.8 million for the fourth quarter of 2006 to $844.1 million for this quarter, due primarily to a decrease in software and hardware net sales, partially offset by an increase in sales of services. Software accounted for the largest portion of the decrease as we continue to see a shift to more enterprise software agreements with only an associated agency fee being recognized in net sales versus gross revenue recognition. As we have previously indicated, we expect this trend will continue and will probably increase going forward. We also continue to see strong growth in our services category which grew by 37% year-over-year, and as Rich noted earlier, our net sales in our hardware category declined 2% due to the challenging demand environment within our client set and internal sales execution issues. Overall, gross profit grew 1% despite the decline in net sales during the quarter. Please recall, given that certain products and services, such as software maintenance contracts, and third-party warranties are recorded as a net sales under GAAP, and that there is a continued shift to Microsoft enterprise software agreements, for which we only receive an agency fee. We believe gross profit dollars is a more meaningful measure of growth. Our software and hardware categories performed well in the quarter and contributed to our gross profit improvement. For the full year North America net sales increased 18% from $2.85 billion in 2006 to $3.36 billion in 2007 due primarily to the acquisition of Software Spectrum in September of 2006, as well as organic growth in our hardware and services categories. Gross margin during the fourth quarter increased to 13.8% from 13.1% in the fourth quarter of 2006. This increase was due primarily to…

Thanks Glynis. I'd like to wrap up today's call with a brief recap of the highlights in the fourth quarter of 2007. We had very strong performance in both EMEA and Asia-Pacific, which offset performance in our North America hardware category and contribute to overall net sales growth of 5%. This clearly demonstrates the key we have for diversification benefits of our global strategy. Our software and services categories continued to deliver strong results across all geographic segments and helped fuel our profitable performance. This demonstrates the product category with diversification benefits of our solution strategy. We delivered growth in total gross margin dollars up 10% year-over-year and increased our gross margin percent by 60 basis points with 12.9% to 13.5%. Total earnings from operations increased 23% and operating margin improved from 2.7% to 3.1% of net sales. All this resulted in a 30% improvement in diluted earnings per share from continuing operation and we ended the year with a strong balance sheet with capacity to support our strategic objectives. As a result of our caveats in our business model and the momentum we built in 2007, we are pleased to provide the following financial guidance for 2008. We expect organic net sales to grow faster in the market growth rate, which we expect to be approximately 5% on a world-wide basis, and 2008 fully diluted earnings per share are expected to range between $1.80 and $1.95 of which 50% to 55% is expected to be recorded in the first half of the year. These expectations reflect the following assumptions; An effective tax rate of 37% to 39% for the full year, completion of the $50 million stock repurchase program authorized by the Company's Board of Directors in November 2007, and cash outlays for capital expenditure of approximately $30 million to $35 million. At this time, Glynis and I are happy to answer any of your questions.

(Operator Instructions). And your first question comes from the line of Brian Alexander from Raymond James.

Thanks, good evening, guys. Rich, just a clarification, is there anything baked into your guidance for '08 for Calence?

Calence from an EPS perspective is baked into the guidance, because if you remember on that call we said it's going to be neutral to slightly positive, so from an EPS perspective that is baked in. In terms of the organic growth rate growing faster than the market, which we said the market is going to earn a worldwide that will grow 5%. The net sales that we will pick up from Calence are not included obviously in the organic statement.

And I understand your objective to grow faster than the market, but if we kind of just look at how you've been trending, in North America 70% of your business and in the fourth quarter hardware and software both declined. And in fact hardware didn't grow in all of 2007. You talked about having some execution issues and maybe you can go into a little bit of detail on what those are and how quickly they will get fixed. And we are probably going to have a more challenging economy in '08 than '07. So I am just wondering what gives you the confidence that you can grow above that mid single-digit range?

Yeah. A couple of things Brian, but first of all relative to the primary strategy and that is kind of on a geographic level, leveraging the footprint that we have now. So that allowed us to grow 5% in the fourth quarter, which is obviously very strong EMEA as well as very strong Asia Pacific performance, we see that continuing. In fact we are making investments to ensure that continues. And obviously some of the sales execution issues that we ran into in North America, specifically in the fourth quarter we believe are short term in nature. I mean real simple, kind of that's boil down, what sales executions issues boil down to is, from a net new transaction in respect of terms of winning new business, new hardware transactions, we were not as successful in the fourth quarter as we would like. So as we go into 2008 from a first half perspective we are putting plans in place, everything from sales incentive programs to smart aggressive bid desks to go out after the opportunity. With that said the hardware business is the only thing from a growth perspective in North America that we’re concerned about. From the services business perspective that grew extremely well in the quarter and from a software perspective as you know we look at GP dollar growth as the significant measure there. And overall from a software business performance both in North America as well as worldwide, we feel very good about our fourth quarter results. One of the things coming off of our third quarter earnings call that you will remember, because I think you may have asked the question is obviously what happened in the third quarter and really the conversation was, hey we miscalled the seasonality of our software business, as a result of that we have seen lower results from an earnings per share perspective than we would like. But we said our expectations are that that software business will return to strength in the fourth quarter, they will have a strong fourth quarter, they will over achieve our full year expectations for the software business which is exactly what happened. So as you look to growth in total, how are we go to, continue to grow faster in the market, which we believe is 5% is returning to some growth in North America, but also leveraging the global foot print that we have, specifically with EMEA and Asia Pacific, as well as continuing the growth we've seen off of our services business, which will help us go drive the EPS that we included in our guidance.

Well I guess back to the guidance, if we're looking at this range of $1.80 to $1.95, how would you characterize the key twin factors that could put you at the low end versus the high end? Is it more a function of growth or is it more a function of margin? And I ask this, because if I just put an 8% growth rate in for 2008 it still appears like you are expecting anywhere from 20 to 50 basis points of margin expansion. And I'm just trying to better understand where that would come from in terms of gross margin expansion or OpEx leverage, because if I look for all of 2007 it doesn't look like we saw any operating margin expansion in that period?

Yeah, obviously we saw significant gross margin expansion. But you are right. Some of the costs that we had specifically relative to our back office operations and some of our IT upgrades clearly didn't allow that gross margin expansion, we saw to flow down to operating margins to the extent that we would like. As we go into 2008, clearly we see gross margins continuing to improve as we continue to do what we did in 2007, which is change the mix of our business. So as we continue to grow services faster than we have historically and as we look to continue to grow our software business we see gross margin opportunities. So that's part of the biggest factor inside of the guidance continue to drive gross margin. Now obviously there is an assumption there that we are going to also grow faster than the market of 5% and from our perspective as we look to the comment we made earlier and to just leveraging our geographic footprint as well as driving some improvements in our North America business, we believe that's also reasonable.

Just to go back to the software and then I'll get back in the queue. It sounds like you are pleased with how the software business performed. I know it's very well in Europe but even in North and in Asia, but even in North America sounds like you view this as a bounce-back quarter, but we are still down 11% in terms of revenue versus a year ago, and I know there are some issues in terms of gross versus net and I don't think we have an update for looking gross profit dollar growth. But am I characterizing that right that you're pleased with the bounce back because I am still struggling to understand why it were still 11% and we should be benefiting from cross-selling relative to a year ago.

We are very pleased with our software results in North America, EMEA, Asia-Pacific and on a worldwide level, so it bounced back. We saw strong results on the software business. And again, what you are seeing in North America, an 11% decline versus that statement is really the growth in that discussion that our gross profit growth and the agency fees, although, we recognize as a result of Microsoft transaction the business directly enhances, thus not recognizing the revenue, but just recognizing GP dollars is exactly what happened in North America, which is why you see that disparity between revenue growth and our confidence and how the business returned to strength in the fourth quarter. And again from a full year perspective, as we got out (inaudible) at the end of the third quarter, we believe that we are going to exceed our goal that we put in place from the software for the full year in the fourth quarter right coming back from what we missed in the third quarter and that's exactly what happened.

So, we did grow gross profit dollars, I should say you grew gross profit dollars in North America in software in Q4?

Yes.

Okay. Thank you.

Your next question comes from the line John Lawrence from Morgan Keegan.

Good afternoon.

Hi, John.

Congratulations on the quarter, Rich. Could you comment a little bit -- Glynis, could you just give a sort of a breakdown in the CapEx for '08 please?

Sure. Our CapEx for '08 is going to be in the range of about $30 million to $35 million. And most of that is related to the continued mySAP upgrade.

And Rich, would you take Brian's question just one step further only execution issues. How much of that as far as the goals for '08 of going back and giving those relationships squared away with those execution issues took place, that was part of the decision to delay that rollout. Can you talk about that a little bit? Who was affected and how difficult it is to reestablish those connections?

Sure. John, those are really tied back to the, what we called out in the last call is that what we experienced in the third quarter was some impact to the web business specifically with our SMB clients given the way we are running the rollout in terms of bulk migration. We took them all to a brand new website and they didn't react too well, to that web experience and hence, basically, what we did in the fourth quarter relative to that mySAPs, we put everything on hold and basically had the whole organization focused on closing out the year. As we go into the first half of 2008, we are going to continue to go a pile of sixes from the SMB web perspective, which will be for the most part implemented here in the first quarter. And then as we go into the late part of the first quarter into the second quarter, we see us being able to get some return off those fixes we put in place in terms of winning back some of those web clients. As related to the overall mySAP program, we kind of took the fourth quarter off to go make sure we focused on closing out the year strong, we've been retooling our plans. So basically, at this point, we're looking to go finish the rollout through the summer time of 2008. So when we provided guidance of 50% to 55% of the full year in the first half because if you go back and do the work, you'll see that we did actually 58% in the first half of 2007, if you exclude stock option and legal expenses et cetera. Basically, one of the bigger two things that drive in our view that the first half from a full-year…

And just a couple of other housekeeping, as far as the [leading] your internal guidance for the fourth quarter, would that be because of EMEA and APAC?

Yes. Our fourth quarter performance in terms of the star performers in the fourth quarter was clearly EMEA and Asia Pacific, they maxed out in terms of execution and just did a wonderful job. And by the way, EMEA each quarter in 2007 maxed out and did a great job and Asia Pacific three of the four quarters maxed out the bonus plans we put in place. So our international footprint, which is to me really showing that the strategy of diversifying geographically is really working for us, was the big driver in our performance in the fourth quarter. Which you know gives me the confidence as we talk about growing faster than the overall market growth rate of 5%, So we continue to get that growth outside the North American geographies.

Thanks a lot. Good luck.

Thanks, John.

(Operator Instructions). And your next question comes from the line of Alberto Mann from Thomas Weisel Partners.

Yes, hi this is Alberto Mann calling for Matt Sheerin. Can we start up by talking about the recently announced share buyback, which you announced in November? Can you tell us how much you've done so far to date?

Sure.

We've actually been in a blackout period as a result of the Calence acquisition and then leading up to this fourth quarter earnings release. So we haven't started that program yet and we anticipate starting it depending on market conditions as soon as we are out of this blackout period.

Okay, great and then, in terms of Asia hitting up nearly 10% operating margin in the region last quarter, what's the sustainable operating margin for the full year in Asia going forward it seems to be out performing in other regions?

And the reason why it is outperforming the other regions, it's purely a software and services mix. So what you see in EMEA is software, hardware and services and with a very large percentage coming from software and also, you see all three in North America. So the biggest reason why you see the operating margin difference, is just because of the mix of products, Asia Pacific just being software and services. And overall as it relates to the fourth quarter results for Asia Pacific, they did have a very strong result; not to say that every quarter that we run at that level, but we have a lot of confidence in that business model going forward.

So is it on a full year basis. Is it mid single-digits or high single-digits of sustainable model in that region assuming you don’t add hardware?

Yeah, I really don’t have that actual number in front of me.

Okay

What I mean, to me as you go back and look at the results that will be published, I mean there is no reason to believe and you bonded out that number. There is no reason to believe that anything is unique that says that model doesn't continue going into 2008.

Okay great. And then you just talked a couple of questions ago about your feelings on the first half being a little bit more sluggish and the outlook obviously and the economy is more cautious these days. What gives you confidence that there will be sort of a rebound in the second half?

Not necessarily a rebound, my personal view and I think IDC data is still and we look at IDC as well as Gardner its sources. It's still pointing to a worldwide growth of 5%. They don’t necessarily breakout 1Q, 2Q versus the half. My editorial comment is the fact that I believe that we are going to see a slower first half versus the second half, just from the pure simple idea that as companies have CapEx budgets are they releasing those on the same schedule they normally would? My guess is many, many companies aren't going to be, because they will be looking at kind of what's going on in the overall economy. So my sense is 1Q and 2Q has a tendency to be slower than what we will see on the full year basis.

Okay great and then just lastly I don’t know if you can, but if you could quantify the approximate contribution of Calence to the EPS guidance that you provided assuming the deal closes on April 1st as you said?

Again as we called out in the Calence call, it's neutral to slightly above, so don’t view that as basically contributing very little.

Okay great. All right thanks.

Your next question comes from the line of [Mike Hue] from Delaware Investments.

Yeah I was just wondering what metrics will be used to determine management's compensation for '08, more specifically is there a return on invested capital metric included in there?

Sure. Let me just give you a quick summary of the comp plan in total. From an incentive bonus perspective outside of, obviously, base salary, 60% of people's incentive bonus is tied to hitting quarterly earnings from operations target, 40% of the range of incentive target is tied to an annual performance plan, which has supporting financial metric inside of which is ROIC. So every executive in the company will have return on invested capital in their annual performance plan for 2008, and it will be one of the metrics that we use to determine their 40% payout at the end of the calendar year 2008. As it relates to our equity program, our equity program is tied to hitting earnings per share targets for the year. It's related to return on invested capital, clearly, we got some new leaders from a financial organization perspective inside the company. Glynis joined the team. Her along with Karen McGinnis, our Chief Accounting Officer are going to take the work we've already started on return on invested capital and continue that in terms of just a focus area for the company in 2008. We actually believe we made some good progress in 2007. But with that said, we still think there are a lot of opportunities for us.

Okay. Two follow-up questions. The 60% of the comp related to quarterly EPS that seems high to me. You don't provide quarterly EPS estimates to the street. Doesn't that kind of force your managers to run the business on a quarterly basis rather than for the long-term, just wondering why that number is so high? And then the second question, in your ROIC calculation, are you including goodwill in that calculation?

As relates to the first part of the question is 60% tied to quarterly results. As you know our business is a daily business. So each and every day you got to come in and figure out how you can go drive more sales and get the gross margins up of those sales, and how are you going to keep your expense structure in line. So we believe very strongly that has been a quarterly aspect to our comp plan, our key people focused on not just the quarter but the day-by-day activities that drive the quarterly results. So at this point in time, we don't see any change out there. Because I think it drives the right kind of results oriented behavior inside of the company. Relative to your question on return on invested capitals include goodwill or not?

Yes it was. Yes it was.

Okay. Thank you very much.

There are no further questions at this time. I would now like to turn the call back over to Rich Fennessy for closing remarks.

Well, thank you very much for joining today's call. Again, we are very pleased with the results we were able to share with you today as it relates to our fourth quarter as well as to our overall 2007 results. And actually more importantly, the results we share with you that kind of fits in perspective for you, what is a team we've accomplish from 2004, although, we are up here to 2007. I mean the kind of growth we saw from a topline perspective, 2.7 going to 4.8, any 200 basis points to our gross margin and significantly growing our earnings from operations dollars. Again, we are a leadership team and hope you have the same feeling of accomplishing a lot over the last three years in terms of transforming our business and again we're looking forward continuing that as we go into the future. So again thank you very much. I'll look forward to talk to you on the next call.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.