Good morning, ladies and gentlemen, and welcome to the Plexus Corp conference call regarding the second fiscal quarter 2008 earnings announcement. (Operator Instructions) The conference call is scheduled to last approximately one hour. I would now like to turn the call over to Mr. Angelo Ninivaggi, Plexus' Vice President, General Counsel and Secretary. Angelo?

Hello. And thank you for joining us this morning. Before we begin, I would like to establish that statements made during this conference call that are not historical in nature are forward-looking statements. Forward-looking statements are not guarantees, since there are inherent difficulties in predicting future results and actual results could differ materially from those expressed or implied in the forward-looking statements. For a list of major factors that could cause actual results to differ materially from those projected, please refer to the company's periodic SEC filings, particularly the risk factors in our most recent 10-Q filing. The company provides non-GAAP supplemental information, including earnings and EPS, excluding restructuring costs, charges for the impairment of goodwill, and other long-lived assets, and adjustments to the valuation allowance on deferred tax assets. The company also provided supplemental information on return on invested capital, in comparisons excluding our large unnamed defense customer. For a full reconciliation of non-GAAP supplemental information, please refer to yesterday's press release and our periodic SEC filings. Joining me this morning are Dean Foate, President and Chief Executive Officer; and Ginger Jones, Vice President and Chief Financial Officer. We will begin today's call with Dean making some comments about the second quarter and the outlook for Q3. Ginger will follow up with details on financials. We will then open the call up for questions. Please limit your questions to one question and one follow-up. Let me now turn the call over to Dean Foate. Dean?

Thank you, Angelo, and good morning, everyone. Last night, we reported results for our second fiscal quarter of 2008. Revenues were $451 million with GAAP earnings per share of $0.48. Both revenue and earnings were consistent with the middle of our guidance range. Our second quarter revenue was down approximately 2% sequentially from our first quarter. Our wireline/networking and industrial/commercial sectors were strong, as expected, and offset modest weakness in our medical sector and the significant $29 million reduction in revenue from our large episodic defense program. Excluding this defense program, revenue grew approximately 5.5% sequentially from Q1 to Q2. Now for a few details about our revenues by market sector in the second quarter and our outlook for the third quarter. Our wireline/networking sector experienced strong 10% sequential growth from our first fiscal quarter, coming in slightly below our expectations for even stronger growth. While 8 of our top 10 accounts were up in the quarter, one newer account, [Wirelop], missed expectations due to unanticipated end-market softness. We currently expect mid single-digit growth in our wireline/networking sector in the third quarter, driven by strength of 5 of our top 10 accounts. Our wireless infrastructure structure was flat this quarter as expected. We expect similar performance from this sector in Q3. Our medical sector underperformed our expectations with revenue declining about 2% in the second quarter. We had expected flat to modest sequential growth. While 7 of our top 10 accounts in this sector delivered growth, one larger account grew, but below earlier expectations due to a slower new product ramp. Consequently, the growth in the 7 accounts was not enough to offset the contraction with our leading account that was in line with expectations and consistent with prior-year seasonality. Looking ahead to Q3, we currently expect revenues in our…

Thank you, Dean, and good morning, everyone. As Dean mentioned earlier in the call, both our revenue and the EPS were consistent with the middle of the guidance range. We did have a few changes during the quarter that impacted EPS that we discussed in the press release, the tax rate change and the impact of the share repurchase program. Income in the United States for 2008 is now expected to be higher than when we established our Q2 guidance. As a result, we are now expecting a tax rate for fiscal 2008 of 20%. This shift is a result of increased earnings forecast for the remaining quarters of fiscal 2008 from existing and new customers for programs produced in the United States. The quarterly tax rate is based on our estimated pre-tax earnings by taxing jurisdiction for the full year. So, this change in forecasted earnings impacts our tax rate for the second quarter. As a result, we recorded an additional $0.03 in EPS of tax expense. Second, we announced a financial recapitalization plan in February. The resulting share repurchases improved EPS by $0.01, which was not included in our original Q2 guidance. I will discuss the financial recapitalization in more detail shortly. Without these two factors, EPS would have been $0.02 higher, at the top end of our earnings guidance. We think this demonstrates solid operational performance during the second quarter. Gross margin was 11.4% in the second quarter, consistent with our expectations for the quarter, but down from the 12.1% gross margin in the first quarter of 2008. The lower gross margin performance was primarily the result of reduced revenue from our large unnamed defense program. We continue to recognize losses in our Mexican facility with an operating loss of $710,000 in the second quarter. This includes…

Thank you, Ginger. As we open the call for questions, we ask that you please try to limit yourself to one question and one follow-up. Ray, we will now take questions.

(Operator Instructions) Our first question comes from Shawn Harrison with Longbow research. Please go ahead.

Hi. Good morning.

Good morning, Shawn.

First question, just dealing with what you're seeing within the end markets, maybe if we could delve in a little bit more into the wireline as well as the medical, and then also what end markets were represented by the 13 program wins this quarter?

Certainly. Let me talk first about the kind of overall kind of what we're seeing in end markets and kind of our feeling about the current economic turbulence. At this point, we see economic turbulence directly impacting only our customers, what we call, in semi-cap equipment. Beyond that we're not seeing any significant longer-term reductions in performance from our customers. If you look at the medical sector, I don't think that the issues that we're facing with those customers today and the challenges that they're having could directly be attributed to the current economic turbulence. It's more related to regulatory issues and perhaps the positioning of their products in the marketplace. And I would say just a general overall change in the competitive profile of their markets where you're seeing more larger healthcare organizations making purchases of equipment and the way purchases of equipment is changing in that marketplace, which is making it more competitive. Beyond that, I don't think that we're seeing anything that's extraordinarily directional related to the overall economic issues. Now, related to the new customers, I think you asked about -- another part of your question was what sectors were the new business in. And let me see if I can grab that quickly for you. As we look at it, we had it actually pretty well-balanced out across the market sectors. A couple of the wins were in the wireline sector, a couple in wireless, four in the medical sector and then two of them were in the industrial/commercial, three in the defense, security and aerospace sector.

What's the FDA-related issues in the medical sector? Is there a sign that those are going to be resolved and shipments will normalize to those customers any time soon? Just maybe just a little bit of visibility there.

Yes, I want to be careful not to overplay this, because the FDA issues that are affecting one of our customers today, so there is one facility that we ship product into. We have actually been cleared to ship product into that customer as we talked about on the last conference call. We had understood that the customer was going to be cleared by the FDA to release product out of that facility. As it turns out, as you all know, our larger customers in medical, you know that they had a difficult announcement, and it became clear that they had not been cleared by the FDA to release product out of the facility. So, there is another customer of ours that has a challenge at one of our competitors. But I think they're completely unrelated. So --.

It sounds like your large medical customer may start shipping again soon.

I would hope so. But our concern or what we're seeing right now and suspect is that this has caused some perhaps competitiveness issues with them. And also, as we've stated on earlier calls, they took a very proactive approach here and went and audited all of their facilities. The customer audited their own facilities to make sure that their practices were proper and that essentially slowed down the new product development pipeline and the launch of new products into the marketplace, which will remain to be seen whether or not that cost them market share by not getting those products out as soon as they perhaps could have.

Okay. And a just quick follow-up on operating expenses, picking up here in the back half of the year, when should we expect to see some leverage on that operating expense number, because it looks like it is going to tick up sequentially almost throughout the year?

John, this is Ginger. Did you mean specifically around SG&A or --.

SG&A. I mean I know you're making investments in staff, and there is more variable compensation expense this year. But just it seems like it's growing at a relatively quicker clip than most probably had modeled.

Yes, we are certainly interested in finding that point where we can leverage SG&A, although we do think it's important now to continue to make investments in our business development organization and to support the revenue growth. We have got good revenue growth this year, and as we look forward, we think we are going to continue to need to build that infrastructure. So, I have given you the best guidance I have for '08. And certainly as we move closer to '09, we will be able to share some of that as we get closer. At this point, I don't have anything to share with you for '09.

I would just say that just generally speaking, we embarked upon our market sector-based business development organizational structure a couple of years ago and we're still in the process of creating the build-out of those teams. We don't need to add significant quantities of people though those organizations once we get the teams kind of fully built out, so the rate of growth among headcount there would taper off. So, I would hope that we would start to see some better leverage in the model as we start to move through '09.

Okay. Thank you.

You're welcome.

Thank you. Our next question comes from Amit Daryanani of RBC Capital Markets. Please go ahead.

Thanks a lot. Guys, just looking at your full-year guidance and the earlier fourth quarter guidance, you're expecting some sequential growth ex the defense business, I think, 3%, 4% in the next quarter and about 6% almost in fiscal Q4, can you talk about what is driving that? Maybe what you see in your backlog that's actually giving you conviction despite the fact of what I have been reading in the The Wall Street Journal, which is not good?

Well, I guess you need to stop reading the The Wall Street Journal, I guess.

That would be a good start.

Just joking. For us, I think you're right, we are predicting obviously growth with the tightening up of the guidance range for the full year. And for us, I think we expect to see the wireline/networking sector continue to perform pretty well and we expect to see that continuing to carry us into the year. We expect to see, believe it or not, later in the year, as we start to come through the year, hopefully some improvement in the medical sector, although I wouldn't hang my hat on having that to be real strong. But we're certainly pretty well positioned there with some newer programs that we have won over the course of time. That may actually take us into early '09 before we start seeing much of an effect there. And then I would say, we will see some modest growth out of industrial/commercial, again, as we come out of the year, but I would say that the primary driver right now is quite a bit of strength in the communications sector, the networking and kind of infrastructure piece of the business.

Is that stemming from just core end-market growth or just new programs that you're ramping to offsetting a slower growth environment?

Well, a combination of both, but I would say, primarily we're being propelled by new product wins and incremental kind of outsourcing from those customers and new products that they're bringing into the marketplace.

All right. And then just sequentially, from the EPS side? Looking at your guidance, $0.09 headwind, could you just break it out on how much of the impact is from the three issues that you guys outlined? And I guess one of the offsets is you do have a $0.02 tail wind from the accelerated buyback next quarter. Is that correct?

Yes, we think the benefit of the accelerated share repurchase will be modest in the $0.01 to $0.02 range. I don't know that I want to break out a lot of that in more detail. You can see the SG&A, and we've talked about that a little bit. And the majority of what is left is the change in the mix. So, the mix of our customers as we move from Q2 to Q3 has changed pretty substantially, particularly related to that large defense program.

All right. And then just finally, could you just touch on what your capacity utilization at this point is across the three geographies? It has been a while since we've seen the EMS [companies] add capacity in North America.

Yes, that's quite an unusual feat they are picking at. We typically don't provide detail on breakouts across geographies. We typically just give you kind of a one-number overall. And in fact, we like to point out that these numbers are pretty squishy numbers as they're calculated different ways between the different EMS companies. So, we calculate ours on an as tool basis not on a raw square footage basis. So, this is, okay, we have a building, we have it tooled up with equipment and with that equipment set what do we think we could deliver out of that facility. But clearly, our capacity utilization here in the U.S. is in pretty good shape. From a raw availability of square footage, the biggest raw availability of square footage we have is today over in Malaysia where we have the 364,000 square foot facility that we added there, the third facility. And that one is of course filling up nicely and then we also have the doubling of the size of the building in Xiamen. So, we have the floor space available there for additional customers. And the one that's probably the most challenging is, the one that we keep talking about, which is Mexico where we're running substantially under capacity.

Fair enough.

And this will give you a sense directionally of where we're at.

Absolutely. Thanks.

You're welcome.

Thank you. Our next question comes from Steven Fox of Merrill Lynch. Please go ahead.

Hi, good morning. Dean, could you just go back over your outlook for wireline telecom? You're saying it's up mid single digits, but that in the quarter you had a small customer that had a miss. Can you just talk about how you get to sort of that mid single-digit growth, how much is driven by new programs versus just customer growth, et cetera?

Okay. So, I will break it down for you in the current quarter and then I will maybe talk a little bit about Q3. When I look at our top 10 accounts in that sector, we actually had 8 of the 10 were up during the quarter. And we had a newer account that we had in fact forecasted even stronger performance. And as I said, it was up, but it was not up as strong as we had hoped, which kind of kept it from that sector from delivering even stronger growth that we had talked about on last quarter's call. As we look to Q3, it's a little bit more of a mixed bag. We've got about half of the accounts up, and the other half of them are soft, but I would say the ones that are soft are some of the newer accounts where they are maybe seeing a little bit of a surge in Q2 with moving products out and then taking a bit of a pause here to see how the market consumes that product.

And then with your largest customer, you're expecting fairly consistent trends?

Largest customer continues to do quite well in the marketplace, and we continue to feel real good about the product mix that we built for them.

Okay. And then just, Ginger, just a couple quick financial questions. How should we think about the share count this quarter? Should we just assume that the accelerated buyback is completed and where would that put the average share count do you think for the June quarter?

Yes, I don't have that number with me. I guess the way I would think about that is that there were 2.9 million shares repurchased in the quarter, and so we will have the full benefit of that in the third quarter. And then the remaining amount, which we can't speculate on right now, because it will depend on the share price, will be pro-rated over the third quarter. So it will be some portion of that is how I would model it.

Okay. But there wouldn't be anything in addition to that? You wouldn't start buying back on your own?

It certainly is possible that we will start purchases in the open market. We would have the ability to do that next week, and we will make that decision opportunistically based on both coordination with Morgan Stanley, who is doing an accelerated share repurchase, and the share price at that time.

Okay. And then last question, just to clarify, the option expense, you said it's about $0.05 per share of option expense in the June quarter. What was it in the March quarter?

So, in the March quarter, the quarter we just ended, it was $0.04 of EPS, $2.2 million in total. In the third quarter, the June quarter, we're expecting $2.7 million and $0.05 of EPS.

Great. Thank you very much.

You're welcome.

Thank you. Our next question comes from Reik Read of Robert W. Baird & Company. Please go ahead. Reik Read - Robert W. Baird & Company: Hi, good morning. Can you guys maybe just talk a little bit more on the industrial side of things? I guess there seems there are two forces at work maybe as a weakening macro, but it also sounds like you guys may have some customers with some product refreshes that can be helping you out.

Yes, well, this is one of those sectors where we just have a long list of customers and we're not heavily concentrated, I would say, with any particular customer. So, it's quite healthy for us in that regard in terms of the diversification. So again, as I look at this, we had really good performance here in Q2. Part of that was driven by a newer account that we won over the last couple of quarters that we started to ramp up their business. As I look forward, again in the Q3, we are saying that I think we said it is going to be relatively flat or so and that's really a consequence of some movement, I would say not broad-based movement down but more of a greater concentration of customers that are seeing a little bit of softness there, although it is not dramatic at this point. I think, again, the business that we have with the existing customers appears to be holding up pretty well. We're not seeing a lot of growth with the current programs that we have, but we are benefiting because we've done a good job going out and winning new accounts and increasing our share with some of the existing customers that we have, and that's what really continues to propel us forward. Reik Read - Robert W. Baird & Company: Okay. And then I just want to go back to the spending on the market-based programs. I take it from what you're saying is that most of this, the bump-up, is headcount related and that you expect to lever that headcount as you get into '09. But can you talk about what you're seeing that gives you the confidence to make the investments now?

Well, what we're seeing is that our value proposition in the marketplace is really strong. You look at our growth rate over this year even extracting out that big defense program. We're going to grow 15, 16% in revenues sans that large defense program. And a lot of that has been delivered, because we've got a great value proposition in the marketplace. And we think now is the time to really be quite assertive and quite aggressive at getting great quality people in place to drive us forward as we look to '09 and '10 and beyond. So, we've got a vision in place here and an organizational design that we want to build out, so that we can really flex the muscles of our competitive position in the marketplace. So, it's a tough call to make, but I think kind of where we see our competitive position, we think now is the time to really do it. Reik Read - Robert W. Baird & Company: And what you're seeing in the market, Dean, is that a reflection of smaller competitors that aren't performing the way they need to or larger competitors that are slipping or is this basically greenfield opportunities?

I would say this business, of course, it is usually a combination of all of the above, but there is no question I think that we are developing a brand of being really good at this mid to lower volume, higher mix part of the marketplace. And so, when we're out competing against the larger competitors, we really have the model that makes sense to customers. And as we look kind of down at smaller competitors, the challenge they have is they don't have the global footprint we have and the high level capabilities for design services and global fulfillment. So, there we have a very strong competitive advantage as well. So, we are the game in town when it comes to that kind of business, and we think that the best way for us to gain share is to continue to attract highly talented people, which we seem to be able to do now. We're attracting some fantastic talent from across the industry, very experienced people coming to join the team. So, we think we're really going to leverage that talent to drive some growth here as we look forward. Reik Read - Robert W. Baird & Company: Great. Thank you.

You're welcome.

(Operator Instructions) Our next question comes from Kevin Kessel of Bear Stearns. Please go ahead.

Yes, thank you. Ginger and Dean, I just wanted to get a better sense for the sustainability of the cash flow and the free cash flow in the quarter, because when I look at it, it's actually pretty substantial. I mean it's more than you generated, I think, in the last two fiscal years combined almost. And so maybe you could help us think about that. I mean I can see part of it is working capital related, but I can't actually tell where all of it is being driven from.

Yes, we did have a good cash generation quarter. We talked in the press release of about $42 million of cash generated from operating activities. And you're right, some of that was working capital, which performed pretty well in Q2. We think we're going to make some additional investments in inventory primarily in the second half of the year to support that topline revenue growth. So, we'll consume some of that cash in the back half of the year, and I think we're going to end up the year generating at least as much cash as we did in '07 and slightly more probably.

Okay. You're talking about cash from operations or free cash flow.

I'm talking about cash from operations.

Cash from operations, okay.

And our investments in fixed assets look to be about the same '07 to '08. We're currently forecasting $45 million to $50 million. We finished '07 at $48 million. So, I would imagine that we will do better on a free cash flow basis as well.

Yes, because I mean just for half of the year, you've almost doubled last year's cash flow generation.

Yes. That is absolutely true. And we will consume some of that in the back half. So, I certainly would expect that I will double my cash flow for the full year compared to '07, but we think it will be better than '07.

And what about from an inventory perspective, in terms of inventory turns? What do you think is the right level of turns for the model you guys are on in and what's actually achievable in terms of turns as a target?

Well, I'll talk in days if you don't mind. But I think at the end of the day, Kevin, the way we really encourage people to think about it is not the individual components but the ROIC measure, because we continue to make investments for our customers. And as long as we also deliver an income statement, a P&L that matches up with that, we are continuing to deliver ROIC in excess of our weighted average cost of capital. So, that's kind of our overriding perspective about it. We are seeing inventory days go up. We have seen that over the last couple of quarters, and we expect that to continue in Q3 and Q4. That's driven by some of the issues we've talked about. Our customers are asking us to hold more inventory to support their programs, sort of doing more direct order fulfillment. And then lastly, we're continuing to ramp new customers. And as we bring new customers on, there are inventory investments that we make ahead of those ramps. So, we think that somewhere in the range of where we're at plus or minus a few days is a good target for us. And at the end of the day, we will judge that truly by the ROIC that we're able to generate.

Okay. And then just looking at again the new business wins, I guess, both in the quarter and over the last couple, from what I can calculate, just over the last four quarters, you guys have won about a little over $500 million in new business, and over the last six, it's closer to 750. So, how should we think about kind of the timeline for when these different programs make their way into the topline?

Well, some are modestly making their way into the topline now. And you see the evidence of that in our underlying growth rate. I mean this is a difficult thing, because we try to give you an annualized run rate to kind of, say, get apples-to-apples every quarter as to kind of how from a barometric standpoint perhaps how we're doing. And it's also important to understand, as we say, that you can't just lob that on top of the forecast, because there is an underlying degradation of the business as the products go end of life, as you have average selling prices come down, et cetera, et cetera. And that can be 5% to 7% decline in the business that you have to overcome right out of the gate. So other than that, Kevin, without starting to give you folks kind of a look at our rolling six-point forecast, which I'm loathe to do at this point because of the dynamics in the industry, how I can give you any better clarity on those numbers.

Got it. And then just lastly on Mexico, so I guess the overall loss seems relatively consistent on the quarter-to-quarter basis, excluding reserves. And when you look at it, it might be pushed out a little bit into the first half of your fiscal '09. So, is that being driven by the delay in the ramp of new programs, because I know one was kind of slated to go in toward the very end of the fiscal year? Or is there something else that might be causing it, because I know obviously you're real close, so maybe there is not a lot that needs to happen, but maybe just timing?

You are right. It is a little bit of demand from some of the customers that are there that are a little weaker than we had hoped obviously. And then you're right, there is another program that is slated to go into that facility, and it's delayed a little bit from what we had anticipated earlier in the year.

Got it. Okay. Thank you very much.

You're welcome.

Thank you. Our next question comes from William Stein of Credit Suisse. Please go ahead.

Thanks, guys. On the new wins, from the quarter, are any of them from your competitors, other EMS companies or are they all kind of new outsourcing or new programs from customers?

Did we take anything from anybody else in the quarter? I actually don't know the answer to that right off the top.

We can get back to you on that, Will.

Okay, great. And then on military, can you handicap for us the chances of getting a repeat order there? I know it's very hard to forecast, but is there anything to know that would lead to you believe you're really not going to get a new order or is it just kind of very unclear?

Well, yes, let me answer this. You kind of teed it up for me a little bit. The way to answer it probably is that there is nothing that tells us we would not get another order. But at the same time, there is just nothing tangible to say that we will. Obviously, the conflicts continue to go on around the world. And as we understand it, the technology is delivering value to the U.S. military and helping us save the good guys. So there is demand, but there is also competing technology. And the whole political environment here is changing rapidly relative to the war with a new administration that's going to be coming into the office. So what my feeling is right now is we're trying to plan without it. And if it shows up on our doorstep, then we will respond to it when it does. We've got some knitty bitty kind of production to finish here related to the service and repair units and a few other kind of units that we're supposed to finish out. But beyond that, we really don't have anything tangible to hang our hat on at this point.

Do we have a target portion of sales from military end market longer term or is that not how you think about the business?

Internally, we do have a longer range kind of target that we're trying to get to. I don't know that I want to put that out here right now. But clearly, as I said in the discussion, even without that program, we actually combine it. Again, it's defense, security and aerospace. And within that sector, we expect that to grow north of 40% this year without that large program. So clearly, we're trying to develop some traction there. We keep talking about the business development engine and the headcount associated with that. Part of that pressure is the resources we brought on to stand up another team to focus on defense, security and aerospace. So we're looking at building that into certainly strong kind of double-digit percentage of the pie over time.

Okay, great. And then just one other quick one. Can you talk about engineering services? You guys, despite what might happen next quarter, I mean you still have very high gross margins relative to the rest of the industry. How big of an influence in that is your engineering services? Can you give us an idea of percentage of revenues and profitability there?

Yes, from percent of revenues standpoint, it's a pretty small business. I think overall revenues there are roughly $50 million, $55 million, so it's a couple, 2.5% or something like that. And if you calculate the numbers, I think we will see it at 3% overall for '08. And clearly, the margin story there is a couple of times, from a gross margin standpoint, what we would achieve in the rest of the business. So, it is an important part of it, but we don't really look at it as a profitability engine. It's certainly is accretive to profitability, but really what it is, is the leverage that we get out of it and the ability to deliver programs in the manufacturing, but importantly also is to have a whole another channel into the customers. So we know whether we can get a good view of what the new products are going to look like, how they're going to get launched or engaged much earlier in the discussions and I think at a whole different kind of level within our customers' organizations when we deliver engineering services. So, we view it as a very important kind of sticky factor to the relationships we have with customers.

Great. Thanks very much.

Welcome.

Thank you. Our next question comes from Jim Suva of Citigroup. Please go ahead.

A quick clarification question, and then I have a real question. Your guidance, that pretty much takes this big lumpiness unnamed defense customer to close to zero or at least no material revenue run rate? Is that correct?

That is correct.

Okay, great. And then can you tell us, does the political environment as far as the elections have any impact from what you think can be with this type of defense business win?

Well, absolutely, I think it will.

Okay. And then last final question, the demand environment over, say, the last couple of months, can you give some views about the demand environment, what you've seen from your customer orders to you and also the competitive environment as some of the other EMS companies may have been struggling a little bit more? Are they kind of coming after some of your business a little bit more?

The competitive environment has changed dramatically. I think that when you look at the marketplace today, I mean there are companies that are financially healthy and doing well. We've been competing against them for a long time in this marketplace and understand how just kind of how they go to market quite well and what we need to do to complete the win. We have some other larger competitors out there that are challenged financially. And I think at this point, it's very difficult for them to kind of go down in the dirt and buy the business. All that is going to do is make the situation worse. So, we really are not seeing a significant change, I think, in the competitive environment at this point. In fact, I think we feel that we're in a stronger position than we ever have, because we actually have stable capacity and growing capacity around the world versus the fear of taking capacity out, engaging a customer and then taking the capacity out or you engage them, which is a huge problem for many of our competitors today.

And, Dean, on the customer demand front, I know you took your guidance for the full year up a little bit on the lower end, but are you seeing any changes there, because all of the headlines in TVs that we see, we talk about, a slowing enterprise, high-end server trends and things like that. Can you comment on your demand orders you're seeing from your customers?

Well, the demand from customers on programs that we've built for quite some time, I wouldn't call it robust. I just keep saying what is propelling us is we're doing a good job, winning the new products, gaining share with the right products or the customers and adding incremental outsourcing overall from existing customers or new customers. But I would not characterize the demand for our customers' products in general as strained. I would say it's not robust, but I would not say it's strained either other than in the semi-cap equipment area, which is really kind of coming through the cycle.

Thank you.

You're welcome.

Thank you. Our next question comes from Yuri Krapivin of Lehman Brothers. Please go ahead.

Good morning.

Good morning, Yuri.

So, Dean, as we look at your defense sector then, excluding this larger-named program, I don't think that you had much growth in that particular segment. And you mentioned that you are bringing new team on board to focus on that particular end market. I think one other large EMS company recently commented that the whole outsourcing in the defense sector has been below their expectations. So, do you feel that these different companies have been reluctant to outsource? And if so, why do you think it is the case?

Well, again, I want to be clear that we call the defense, security and aerospace. That's the sector for us. And in fact, Yuri, we are going to grow north of 40% this fiscal year in that sector if you remove the large program that we keep talking about. So, we actually are seeing decent growth there, and we're seeing a pretty decent and robust pipeline of opportunities there. And it is a little bit more challenging to get these customers outsourced, because than of them have not substantially outsourced kind of their internal manufacturing historically, although I'd also say that when they do outsource, their supply chains are fairly fragmented to a lot of tier 3 and tier 4 providers. And we again offer I think a better global value proposition to those customers as they looked to consolidate those supply chains.

Okay. I understand. And then with respect to currency movements, any thought on our financial results is a result of currency.

No, no substantial impact. We have seen a little bit of appreciation of the Chinese renminbi and some of our locally sourced costs of labor and local supplies, but nothing that has had a material impact on our results so far.

Great. Thank you.

Thank you.

You're welcome.

Thank you. There appears to be no further questions at this time. I would like to turn the floor back to management for any closing comments.

All right. Well, we finished up a little bit early today. So, I want to thank everyone for their participation in the call, their questions, their interest in Plexus. We appreciate it very much. And I would also like to extend a thank you to the employees of Plexus. They've a fantastic job, delivering really outstanding execution on behalf of our customers. So, thank you, everyone.

Thank you. This concludes today's Plexus second quarter 2008 Earnings Call. You may now disconnect, and have a great day.