Welcome everyone to the Synnex third quarter 2008 earnings conference call. (Operator Instructions). Ms. Crowley, you may begin your conference.

Welcome to the Synnex Corporation’s fiscal 2008 third quarter earnings conference call. Joining us on today’s call are Kevin Murai, Co-Chief Executive Officer, Dennis Polk, Chief Operating Officer, and Thomas Alsborg, Chief Financial Officer. Before we begin I would like to note that the statements on today’s call, which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements include, but are not limited to, statements regarding our general economic condition and any weakness in IT spending, the loss or consolidation of one or more of our significant OEM suppliers or customers, market acceptance and product life of the products we assemble and distribute, competitive conditions in our industry and their impact on our gross margin, price, margin, and other terms with our OEM suppliers, our ability to gain market share, variations in supplier sponsored program, changes in our cost, and operating expenses, changes in foreign currency exchange rate, risks associated with our international operations, uncertainties and variability in demand by our reseller and contract assembly customers, supply shortages or delays, any termination or reduction in our floor plan financing arrangements, credit exposure to our reseller customers, and negative trends to their businesses, and risks associated with our contract assembly business. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in these forward-looking statements. Please refer to today’s press release and our documents filed with the Securities and Exchange Commission, specifically our most recent Form 10Q filed in July of this year. For more information on some of the risk factors that could cause actual results to differ materially from those discussed in these forward-looking statements. In addition, any use of the word pro forma refers to figures that are non-GAAP. Additionally, this conference call is the property of Synnex Corporation and may not be recorded or rebroadcast without specific written permission from the company. Now I’d would like to turn the call over to Thomas Alsborg for a recap and comments on our financial performance.

I’m going to begin by summarizing our results of operations for the quarter Revenues for the third quarter 2008 were $2.05 billion dollars, a 16% increase over the third quarter of 2007 and a 9% increase sequentially. These revenue results exceeded both our Q3 guidance and Wall Street projections. Growth from acquisitions contributed approximately 14% points on a year-over-year basis. We believe our growth in revenue on an organic basis is attributed to market share wins resulting from our strong execution in the marketplace and our ability to drive down costs for our customers. Our third quarter net income was $22.15 million dollars or $0.66 per diluted share. This again surpassed the high end of our guidance and came in well above analysts projections for the period. These results equate to a net income margin of 108 basis points, a record high for Synnex, compared to 82 basis points in the same quarter last year. This also represents a 32% increase in net margin year-over-year. Our gross margin also set a record high of 5.52%, representing an increase of approximately 34 basis points compared to the same quarter prior year. With the higher achievement of revenue, we realize increased leverage over our costs along with a greater margin and profitability. Additionally, resulting from our revenue performance, we were also able to maximize our variable incentives, which contributed to our margin improvement. We remain diligent on improving all aspects of our gross margin, including freight and we have good success in our execution so far. During the quarter, we benefited from the timing of accumulation of regular periodic operation activities, as well as an additional benefit from the growth in our business outsourcing services. In addition, work we began several quarters ago to maximize efficiencies and control cost associated with freight…

I’m very pleased by our results for the third quarter. The Synnex team continues to execute very well. Our third quarter results are a clear demonstration of our operational excellence and our ability to move the needle as we continue to grow and diversify our business. As Thomas mentioned, the third quarter represents a number of record-breaking financial milestones never before achieved in the company’s public history. Record revenue of $2.05 billion, record gross margin of 5.52%, record operating margin of 1.93%, record EPS of $0.66 per diluted share, a 49% increase year-over-year. Our gross profit to expense ratio or GPE was $1.54 in the third quarter, up eight basis points from our second quarter, again reflecting our ability to scale against our infrastructure for increased profitability. Finally, ROIC was 8.3% and return on equity was 13.4% in the third quarter, highlighting a virtual string of significant year-over-year ROIC and ROE improvements. Our excellent performance is due to the hard work and dedication of the Synnex team and I’m grateful to all of our employees worldwide whose focused efforts really paid off in the third quarter. With the completion of our third quarter 2008, Synnex achieved our 85th consecutive quarter of profitability. With our track record over the last six quarters, you’re seeing a reoccurring theme from Synnex of continuous and operational excellence in our business process services strategy, which is helping Synnex to drive industry-leading results. From a business perspective, all of our business units performed to our internal goals. In particular, our 2007 BPO investments are performing as planned and we continue to look for ways to realize additional synergy. With the addition of New Age Electronics, our consumer electronics business hit the mark with back-to-school push. Regarding the market, as we anticipated in June, the market conditions…

We’d like to open the line for questions.

(Operator Instructions). The first question is from Matt Sheerin with Thomas Weisel.

First question, Kevin, just back to your commentary on what you’re seeing in the market as well as your guidance. You’re being cautious trying to figure out how much of that is just being conservative like you end up being last quarter or are you starting to see September off to a slower start? You obviously saw talk about the US specifically being softer in the month of September and also if you could talk about your approach regarding the freight cost being passed along to customers by your competitors, whether you think that’s going to help you gain share there, or are you seeing share opportunities in that way and what does that do to your margins?

First of all, just in terms of the overall market and what’s happening right now in the economy, there’s certainly more uncertainty today than there had been in previous quarters, but as we see the market right now, it is still relatively stable here in North America. There are certainly shifts in demand, up and down, week by week and month by month, but we haven’t seen any meaningful change overall in overall demand. Moving onto the second question, we’ve been working very, very hard on going back and renegotiating our freight costs and really leveraging the network of 17 warehouses that we have across US and Canada and then being able to drive any cost efficiencies that we’re able to get from that back to our customers. So as we constantly evaluate the impact of increasing surcharges and overall profitability, at this time we have no changes planned and we’re waiting to see how this all really plays out in the marketplace, but again I think the proof is we’re able to continue to gain share profitably and at the same time increase our overall margins.

Does your strategy on the freight side and your setup logistically, is that helping you gain share do you think or too early to tell?

I do believe that there probably are some share gain opportunities, but again, looking at the opportunity, it’s really profitable share that we’re focused against and it’s not just a freight charge component or terms around freight. I truly believe that we’ve been able to out-execute in particular in the past few months, we manage our cost so well, we manage the business so well, and as we continue to enhance service to our customers, I do believe that we’re just winning share on the market place.

Your next question comes from Brian Alexander with Raymond James.

I wanted to talk a little bit about the New Age acquisition. The contribution to revenue in the third quarter sounds like it was a little bit below $250 million, which is actually well above what I was looking for. Is New Age what drove the upside relative to your guidance and could you remind us of the normal seasonality in that business both in the third quarter and the fourth quarter on a sequential basis? What should that business look like? Because your revenue growth organically in the third quarter sequentially was two times what I would consider normal seasonality, but your guidance for Q4 implies kind of a mid-single digit sequential growth rate, which is less than half of normal seasonality. So I’m just trying to get a sense for whether New Age is causing the seasonality to change and what drove the upside relative to your forecast in Q3.

We can’t as I’m sure you’re aware. We’re not going to break out the specific revenue that came from the New Age acquisition. What I would tell you though is that New Age is performing well and as we commented on the call, we had a very health back-to-school season. Also from a consumer electronics perspective, the market is alive and well. New Age we believe is not only holding its own, but actually winning share in the marketplace, which is certainly meeting, if not exceeding, our expectations.

I would just add that as Thomas and Kevin noted in their comments that we’re very pleased with the New Age acquisition to date, what the New Age leadership and team has delivered, but more importantly we see a lot of opportunity moving forward. As we get farther away from the acquisition and integration of the New Age business, we see a lot of leverage and synergies from the New Age division and that will help drive our numbers.

Could you talk about whether that business carries more or less operating leverage than your legacy distribution business?

When we acquired New Age, one of comments that we made is certainly from a US perspective that its margin profile is consistent with our overall US margin profile and making that reference from our primary focus, which is the operating margin. So I would say that we get good leverage, but primarily that leverage comes from the fact that we acquired the company, brought them on board, and we’re able to take out so many costs and leverage of our infrastructure.

My question, Thomas, is on an overall annual basis. It delivers similar margins, but is there greater variability such that in the second half of the year those margins would be much higher than the corporate average and in the first half of the year they’d be lower or are they comparable in each quarter?

You would see greater leverage simply because of the seasonality of the business, but I wouldn’t suggest that it’s significant.

On the BPO acquisitions, maybe a little more color there in terms of how fast those businesses are growing, where are you investing, what are some examples of the synergies that you are realizing on both the high China side and the support side?

On the BPO business, we are pleased with how the businesses are performing. They are performing very well. The combined businesses did grow faster than the overall company on a top and bottom line basis in the quarter, albeit from a much smaller base. We did add several customers during the quarter and at this point in time we’re very pleased with the execution of the management of the BPO team. We’re invested in that business and we plan to make more investments moving forward.

Some real examples of synergies, Dennis, and should we think of the high China business as potentially becoming a value added reseller of technology products to its captive audience of business users?

From a synergy perspective, we have now BPO businesses in the US and Philippines and in China as well as several other countries. By having those locations, we’re able to offer our customers more delivery points. By having that, that allows us to go out and win more customers and market share. That’s one. We create internal synergies by using the BPO businesses to serve our own entities, as well we’ve used the leverage of the Synnex relationships for the past 25-plus years to bring customers to these businesses.

Your next question comes from the line of Ananda Baruah from Banc of America.

Kevin, you mentioned there’s more uncertainty out there today than there has been in prior quarters, but you also mentioned that you haven’t seen any real meaningful change in overall demand trends. Can you reconcile those two comments? What’s the nature of the uncertainty?

In terms of the day-to-day demand that we see. There’s vary ability just in what we see on a daily basis and we haven’t seen any meaningful change in what that is. With the relative uncertainty out there though and just changes that you hear in tones of anecdotal comments both from manufacturing partners or customers as well, it just makes it a little bit harder to call what the coming months is going to hold for us, but that being said, at least from what we see right now, it has been relatively stable and again there are some segments that are stronger than others. There are some that are softer than others, but at least right now it’s been relatively stable.

Have you picked up on any change, whether it be tone or demand on the margin as a result of what’s taken place in the financial markets in the last two weeks?

Certainly a lot of questions around that. I can tell you that from our perspective and there’s I guess a number of different components to looking at where potential impacts could be. From our own perspective, because of our healthy balance sheet, we are well positioned to continue to operate and grow our business. We’re very diligent in managing our credit lines with our customers and as a result I don’t see that as any kind of hurdle at all to growing our business, helping our customers grow their business. Perhaps down the road, if some of the credit issues out there do start to impact demand at the end market level, that could start to have an impact overall on what demand is going to be in the marketplace, but again, we haven’t yet seen the impact of that.

So demand is still soft as it’s been for the last couple of quarters, but is relatively stable inside a soft environment. I mean is that a fair way to characterize what’s going on still?

I would say that’s a good way to characterize it.

On the margins, can you just peel back more greatly peel back the components that led to the gross margin expansion?

We just had a superior execution during the quarter. Obviously when revenues are even surpassing the top set of our own goals, that gives us many opportunities to scale our business model. On top of that, of course, it enables us to meet more of our vendor rebate targets and vendor incentive targets and we certainly benefited from that as well. I would point out, there’s nothing particular one time in nature about the operating results. It was just a very well executed quarter.

Were rebates significant enough such that if you don’t beat whatever your internal goals are by that same amount again, you would see the margins come down a little bit? More stable, the best way to think about it? I mean I guess that’s really what I’m trying to get my hands around.

Often, because of our continuing gross margin expansion, but our operating margin expansion, which is important to us, we often receive questions. I think what you’re getting at is what’s the limit, right? What I would tell you is that there are plenty of opportunities in this company and we were just talking about these even as we were celebrating our great results in Q3. There are many more opportunities in this company to continue to expand our margins. Certainly when we scale our revenue we’re going to see the margins on the higher end of our expectations, but I would not suggest to you that in any way we’ve reached any kind of a cap, which again I think is what you’re getting at.

I think a year ago, the comment was you thought you could expand margins by five basis points or something like that. You’re already up well over ten basis points.

One other comment is that target or rule of thumb that we had a year ago, whatever we want to call it, again that’s with reference to our distribution business and clearly we’re beating that goal, but I also want to comment that we’re business process service company so we have the distribution business, but we also have a very healthy business process outsourcing business, which continues to grow as well. I would also point out that the growth in that business process outsource is more akin with the BPO market, so it is outgrowing our core distribution side of our business. So that also is a healthy contributor to our margins.

Last one. Any material change in the assembly business over the last couple of quarters.

The assembly business is actually going very well. Our integrated assembly/distribution unit performed very well in the quarter. Its revenue and income has grown each quarter this year. We’ve added new customers. The business is expanding. It’s integrated with our systems integration distribution segment. So we’re getting synergies there as well.

That growth that you refer to, Dennis, is that sequential or year-over-year?

I know it’s sequential for 2008, but there also is year-over-year growth as well?

Your next question comes from Analyst for Richard Gardner with Citigroup.

Had a question on pricing. It seems like you as well as all your competitors have talked about pricing being aggressive in certain areas of the market. Has that changed at all?

It’s an ever-changing thing, day-to-day, but as more of a macro comment, it’s always been competitive in the North American market and it continues to be so. Again, I think what I had said before was because of the mix of business that we have, you know, focusing a lot of our business in SMB typically serviced by Var customers, we have good business as well in the retail consumer segment. We’re not as dependent upon some of the big deal business that some others might be and as a result of that we can be pretty choosy on the business that we decide to take and we are very, very much biased towards taking business that is only profitable and growing our EPS, certainly over growing our overall revenue.

On inventory, I did see that inventory is actually ticked down in the third quarter where usually it does have a significant bump. I was wondering are there any issues over there, the different dynamics that might have an influence to tick down.

Joe, the answer is no. It’s business as usual. We had commented in recent quarters that the levels of inventory that we were experiencing were temporarily high usually because we were bringing just the timing of the acquisition of that inventory towards the end of a quarter and what you’re seeing here is number one, the fact that we worked some of that down and then number two that we’re focused on continuing to improve our inventory terms.

Your next question comes from line of Rich Kugele with Needham & Company. Richard Kugele - Needham & Company: Just a couple questions. One just a little more specifics on the CE side. Are you primarily talking about strength for back-to-school around notebooks or if there were any other that were notable?

The notebook market is relatively a strong market and coming into the back-to-school season. I think there were a number of components to our success in particular in back-to-school. First of all, I think we were playing in the right categories. Notebooks certainly being a leading one, but also we ran a number of successful promotions with our vendors focused against back-to-school, including promotions that drove incremental sales and printers, as an example. Another piece is that over the past number of months, our New Age Electronics business has done a very good job in continuing to penetrate what I would call our tier two retail segment, which is more the regional retail folk and they’ve increased their presence there. They’ve increased their share there and that still remains a pretty good place for consumers to go and buy their back-to-school equipment and those are kind of all the reasons that we saw success in back-to-school, but yeah, you’re right. Notebooks were a strong category. Richard Kugele - Needham & Company: Kevin, as you look at your business over the next three months, four months, what areas do you watch perhaps a little closer in light of what’s going on in the economy? Do you just focus on the SMB as the place where you might see it first? Where do you think would be the first place that the economy would likely show up?

That’s a great question. I think we take a number of different data points and we kind of look at how they all line up in balance. SMB, as I said, has historically been probably the most stable environment. Growth historically had also been noticeably higher in SMB than it had been in other segments as well. We are seeing since about a year ago, we are seeing softness pretty much across the board, but again it’s been stable over the past year. We also take a look at other data points around different product segments too. So that being said though, I think the way that we’ve been managing our business is continuing to look at where the growth opportunities are by market, look at where the growth opportunities by technology segment as well, and there’s always going to be pluses and minuses, and if you manage it properly, hopefully you can manage to grow a little bit faster than the overall market and do it a little more profitably. So that’s where our focus has been, but overall there haven’t been any key data points out there yet that say that there’s a significant change in what we’ve been seeing so far. Richard Kugele - Needham & Company: Lastly, Thomas, just directionally as we adjust all models, can we just be thinking about having maybe a little less revenue growth and a little bit better gross margin or at least consistent gross margin around where we’ve been?

You referring to Q4? Richard Kugele - Needham & Company: Well I mean even just structurally with the business If the economy remains wishy-washy over the next year, with some seasonality as it normally happens, should be basically just be thinking about you being strategic on how you take the business, that the margin is almost more important than the top line and model it that way.

Let me share a couple of things. First of all, our primary goals here are growth in earnings per share and growth in ROIC and when we think about margins we focus on operating margin and net margin and when you take on business, those are the decision criteria that we make. As far as our revenue growth, notwithstanding the fact that as Kevin said earlier, we are focused on winning profitable business in terms of market share. Our history has been to outgrow the market. I think we’ve demonstrated that this quarter and we’ve demonstrated that over the past few years. So the way we think about our business is around those kind of parameters. When we think longer term, we’re looking at the same data points that everybody else is, including GEP and so forth, but we challenge ourselves the ability to out execute the market and to grow profitably. I mentioned also earlier with regards to the gross margin, might be able to give you specific guidance, but as I commented earlier, seriously we are focused on improving all areas of gross margin and we do believe that there are still yet other ways to improve it.

You have a follow-up question from the line of Ananda Baruah from Banc of America.

Quite similar question. So we modeled some sort of modest margin expansions for fiscal year 09. Would you say that we’re crazy and try to talk us down from doing that or is that kind of consistent with the way that you think the business can continue to run even in softer spending environment?

I appreciate your question and the challenge that you guys have with regards to modeling. You know, talking about 2009, right now I think it’s a little preliminary. The only comment I would make too is that as things unfold, we’re going to have changes in our product mix that through the distribution side we’re going to have changes in our mix with regards to the growth of BPO business. So there’s still a lot of variables out there that honestly even though we have done our own internal plans forecasting of course, I think it’s premature for us to be talking about, Ananda.

Flat operating margins would be not unreasonable. All things being equal, correct?

Last fourth quarter, we had operating margins in the 1.69% range, I believe. No, for the year, that’s what it was and we shared that for this year we expected to grow that by about 20 basis points. I would just tell you this is that the company is intent on continuing to grow earnings per share and continuing to expand our operating margin.

And your previously stated goal of earnings per share at least 15%?

It was after the acquisition of New Age, we bumped that up to an excess of 20% and we’re highly confident in achieving that goal this year.

Wasn’t there a longer term goal?

In January of this year, we shared that 15% goal with respect to our growth on an organic basis for the year.

Lastly, I guess areas of particular strength, particular weakness, and everybody changes. Have you seen changes this quarter versus the rest of the last quarter?

For our overall business, for the most part, not matter how you slice and dice segments by customer, by product, most of our segments did grow, but so within that growth on a relative basis, you know, if ours were kind of steady, so to say. Retail business was strong and a lot of that was driven by back-to-school. Overall DMR business was on a relative basis softer. From a product standpoint, notebooks continue to be strong and I think some of that driven by back-to-school, but just in general that continues to be strong. We did see strength in peripherals in software and again on the product category side, relative softness in very few categories, but I could point out server as well as some areas of components.

There are no further questions.

We’re going to go ahead and conclude our call today. Thank you for joining us. We will have an instant replay of this call available for the next two weeks beginning today at approximately 5:00 pm Pacific time and that’ll run through October 9th, 2008. As always, should you have any follow up questions, both Thomas and I are available to take your calls and once again thank you for your participation today.