Welcome to the JDSU fiscal 2007 fourth quarter earnings call. (Operator Instructions) I would now like to turn the call over to Michelle Levine, Director, Investor Relations. Please proceed, ma'am. Michelle Levine: Thank you and welcome to JDSU's fiscal 2007 fourth quarter and year end financial results conference call. Joining me on the call today are Kevin Kennedy, Chief Executive Officer and Dave Vellequette, Chief Financial Officer. I would like to remind you that this call is likely to include forward-looking statements about the future financial performance of the company. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to look at the company's most recent filings with the SEC, particularly the risk factors section of our Form 10-Q filed for our quarter ended March 31, 2007 filed May 9, 2007; and our most recent report on Form 10-K filed September 18, 2006. The forward-looking statements, including guidance provided during this call, are valid only as of today's date, August 22, 2007 and JDSU undertakes no obligation to update these statements as we move through the quarter. Our comments today will include non-GAAP measures. A detailed reconciliation of these non-GAAP results to our GAAP results, as well as a discussion of their usefulness and limitations, is included in today's news release announcing our results, available on our website at www.jdsu.com. Finally and as a reminder, this call is being recorded and will be available for replay from the investor portion of our website at jdsu.com/investors. I would now like to turn the call over to Kevin. Kevin Kennedy: Thank you, Michelle and good afternoon. Highlights for JDSU's fiscal fourth quarter non-GAAP results include, but are not limited to, fourth quarter revenue of $351 million; overachieved the…

Your first question comes from Subu Subrahmanyan - Sanders Morris. Subu Subrahmanyan - Sanders Morris: One clarification on the revenue from the acquisitions. Can you give any color between Picolight and Innocor, where the split was? Were they more or less equal? Then I really wanted to focus on two things. One is your revenue guidance, given improving orders in OpticalComm. Just trying to figure out what that implies for OpticalComm sequentially and what it implies for CommTest, since it has been growing at such a strong pace, and whether that is sustainable? Second, if you could talk about some timing around the operating margin targets you're talking about. I know you said end of year for the first target, but for the 10% plus, if you could put some sort of timeframe around that? Kevin Kennedy: Just to restate the benchmark for the combination of Picolight and Innocor, we said that the combined contribution was in the mid single-digit millions of dollars. Given the timing of those and the amounts, there was not a significant difference in those, a slight bias towards Picolight. But I think that's about as good as I can help you with on that one. On the OpticalComms and CommTest, maybe to emphasize some points, one is that OpticalComms with a book-to-bill greater than 1 and the advent of a full quarter of Picolight, should give you a sense of the direction of that business. Secondly, if you are mindful of the fact that historically, at least as I reflect upon last year, in the CommTest business we tend to see a slow August and then a vigorous September. So what we have to deal with is how much can we make or turn, based upon the orders that come in September? So the downward pressure comes with our ability to convert turns in the end of this quarter for CommTest. The direction of OpticalComms, I think, is clear from the confluence of the full quarter of Picolight and the book-to-bill of the business. Dave, any thoughts? Subu actually had three questions. Dave Vellequette: What was the third question? Subu Subrahmanyan - Sanders Morris: It was on operating margin, timing. I know you said end of calendar year for the near-term target, but for the longer-term target, any kind of timeframe that you could put around that? Dave Vellequette: When we talked about, generally, this longer-term target, we talked about by the end of calendar year 2008. So let us get through the near term and the successful execution there, and then we will talk, maybe provide some more specifics about our ability on the longer term.

Your next question comes from John Harmon - Needham & Co. John Harmon - Needham & Co.: Can you talk about the performance of your CommTest business, given last year what looked like less normal seasonality? Last year, revenues declined throughout the fiscal year. But in fiscal 2007, they have sort of been increasing on a quarterly basis. Is that all due to the Oracle installation, or what else is going on there? Kevin Kennedy: I'm going to try to respond to your question in my own words, rather than use the frame that you provided me. At the end of the day, what we know for sure and what is repeatable in history is that the December quarter tends to be a strong quarter. Typically, as I've explained to others, this is due to basically an order, use-it-or-lose-it phenomenon at the carriers. So that, I don't think, has changed. We have had a number of things that have changed the trajectory. That being said, given that December is the peak, the nadir tends to occur sometime thereafter, during the year. I think we have modulated some of that impact out. Clearly, the August month is a slow month, relatively speaking, and I don't think we will see a repeat of what we saw last year, where we had multiple factors in the September quarter. But nevertheless, we do have a lot of business to turn in the September quarter. Obviously, the growth rate of CommTest, one has to observe that it has been quite significant and stellar, compared to the market more generally speaking. We have invested in a number of new areas, anything from growth outside of North America has been very strong in the cable operators to beginning to emerge, which was a growth area for us, in the network equipment manufacturers around 40 gig. In fact, our strength in 40 gig worldwide has been very supportive. So I'd say identifying the pillars of strength, those are the things that are driving us. So hopefully, I've given you some rationale. But obviously I'm very pleased with the performance of that team.

Your next question comes from Brant Thompson - Goldman Sachs. Brant Thompson - Goldman Sachs: I was wondering if you could give any color on the pricing environment in the Optical Components segment? As we think about the turnaround that's ongoing in that business, based on your near term guidance, it doesn't appear that you're expecting any kind of significant rebounded in the profitability of that business. I was wondering if you had any extra color on where we were in terms of a fully getting through lean manufacturing and customer consolidation? I know you pointed out that book-to-bill is above 1, but could that be attributed more to one of these factors clearing and not the other? How should we think about that? Kevin Kennedy: I'll take a shot at it, and probably hope that Dave can provide more color. In terms of pricing, we have traditionally observed the range to be between 2% and 4% each quarter. We were probably closer to the bottom of that range this quarter than the top. So fundamentally, I wouldn't say any major change to the general rhythm of pricing in that particular market. Relative to the profitability and gross margin, I would say that certainly we had a very significant in terms of magnitude, correction that we had to deal with. If you went back several quarters to where our peak revenues were, we peaked at around $138 million. As you might guess, in an improving market like that, we probably had capacity that was someplace between 10% and 20% greater than that. We made a decision, as I tried to identify in the notes here, to reset or correct our capacity such that we have capacity at least 15% to 20% ready above where we finished the quarter. That meant that there was a significant correction, in terms of headcount and a number of things. The thing to know about this business, and I've said it before, this is a variable cost structure business, and certainly on the upside. As you begin calling down, you have both fixed and variable costs. Examples could be a reduction of capacity, reduction of headcount and the time that it takes to do that, as well as contract manufacturer minimums required for such. So a key model is variably on the upside, both fixed and variable on the downside. It takes time to correct. We've done a lot in the last couple of quarters. As I said, the first piece to gross margin improvement is to get the revenues back up, followed by the other four items that I enumerated. Hopefully, that helps.

Your next question comes from Kim Watkins – JP Morgan. Kim Watkins - JP Morgan: I wanted to ask a question on the Test and Measurement gross margins. Dave, I heard you say they were up slightly. Were they within the 55% to 59% range, and could you also talk about some of the drivers there that took them either to the lower end or higher end? Dave Vellequette: Yes. They did increase slightly. They are at the lower end of the range. As we noted last quarter, the margins fell below the range. The factors that drove it up by that small amount was basically just a better mix of the product. We don't really see much in the ASP pressure in that environment, so it becomes more of a mix within that product line. So that's what moved it up slightly. Kim Watkins - JP Morgan: Just to follow up on the OpEx level, I know you've said for a while now, with the recent acquisitions you're going to be above your target, 35% to 38%. I was a little surprised by the level of above. Is that a timing issue? How should that trend down from here? How long does it remain above? Dave Vellequette: We are slightly above. We were some 38% plus for the last quarter. We expect it to be slightly above in the current quarter, as we have the full impact of the operating costs with the Picolight and Innocor. So it will be driven as we have basically these revenue levels from the OpticalComms at the current level as they are recovering. As they get to a more normalized level, you'll see that operating expense come down, plus we have always a number of initiatives to reduce those costs slightly. Kevin Kennedy: Let me reiterate though that on one hand, you wouldn't immediately adjust for the acquisitions which, of course, were a partial quarter. We also, as in the case of our manufacturing capacity, we did not chase OpEx down dollar for dollar as revenue in OpticalComms was softer. So 0.6% out of 38% is a reasonable threshold to float as we adjust and normalize. Kim Watkins - JP Morgan: Just an interpretation of that, it sounds like on a percentage of sales basis, it might come down from there as some of the cost savings flow through. Kevin Kennedy: Yes.

Your next question comes from Ajit Pai - Thomas Weisel Partners. Ajit Pai - Thomas Weisel Partners: On the tax front, I think in this quarter itself you had a tax benefit. Were you expecting that? Then on a go-forward basis, what would you want us to assume the tax rate to be? Dave Vellequette: What we had is we had a couple of things. We've had the Acterna acquisition now for two years. We are looking at consolidating some of these foreign entities, and we got a favorable consolidation activity in one of our countries. Instead of having a tax provision in that country, because we had two legal entities, we had one. So that resulted in a favorable result. So that was the primary thing, in certain legal entities with the tax requirements based on the mix of the revenues in those countries. So that's why we ended up with a favorable number for the year. Going forward, as I said on the call, we think the provision will run between $4 million and $6 million per quarter. Ajit Pai - Thomas Weisel Partners: The second question is just looking at your Optical Communications group right now. Could you give us some color as to the initiatives that you have? I know you've talked about further reduction in headcount going forward. What percentage of your products already are outsourced, and how much more potential is for further outsourcing of them? Kevin Kennedy: I don't think the percentage of product outsourced or an implied increase in that percentage is something that is at the forefront of our economic thesis there. I think there are many things such as the level of Asia localized content , and frankly, I enumerated five different pieces that are all elements of improving the…

Your next question comes from Jeff Evenson - Sanford Bernstein. Jeff Evenson - Sanford Bernstein: You mentioned during the call that some of the softness in Optical Communications revenue was due to product platform transitions and changes in the supply chain. Wondering how you feel about your ability to retain share, and if you could give us some color on some of the indicators you're looking at to make sure that happens? Kevin Kennedy: At some point every quarter, someone else will calculate share and so forth. Let me tell you what I believe and some other anecdotes about the distribution numbers. If I were to look at all of our device categories, whether they be long-haul components, metro components, data components, undersea components, simply in that group, we grew anywhere from 10% to 30% in each of those categories over this last fiscal year. So I think the growth has been reasonably good. I think we have invested very heavily in metro, which was the strongest growth of those four categories. What I think we will minimally see in the numbers is that there are areas where we chose not to invest. For example, we exited 10 gig fixed. I think that particular area has been on a run lately. So those that are there have been great. Meanwhile, the areas that have paused for us most specifically were concentrated around a small number of customers, and they were affiliated with the businesses that were what we have heretofore called subsystems businesses, businesses where we were putting either our components or other components on circuit cards. That business was concentrated to the smallest number of customers, highest ASPs and the ones most likely to be caught in inventory lockups, meaning people saw inventories of it and wanted to purchase. So as we look over the year, the majority of our components businesses all actually grew double-digits. The places where we saw softness year over year were actually in the subsystems business that got caught in the pause. I hope that helps you. Jeff Evenson - Sanford Bernstein: That does. Was book-to-bill greater than 1 in Optical Communications if you exclude Picolight? Kevin Kennedy: Yes.

Your next question comes from Todd Koffman - Raymond James. Todd Koffman - Raymond James: With regard to the Optical Communications profitability levels, this business has lost money. Even when you were doing close to $140 million a quarter, it was barely making a decent return. But very similar trends are experienced by most of the other public optical component companies. Almost everybody is flirting in and out of losing money or consistently losing money. What are your thoughts about the structure and profitability of the industry? Kevin Kennedy: It's certainly a fragile industry from the point of view of profits. Let me characterize in the following way. I believe profits in optics are best observed by what you choose not to do versus by what you do do; and what you do do, you have to be extraordinarily efficient and do very well. Because of that observation that you just made, and the fact that there's a fair amount of capital intensity to the companies that have gone heretofore in those areas and actually the overlap of so many companies, there's a high barrier to exit, meaning there's a very low desire for one public company to use its cash to go restructure another public company. So I don't see a significant change overnight. I do think people will continue to try to get bigger with small adjacencies to their portfolios. I think there will be some subset, call it five, that will actually be the profitable ones over the longer course, and there will be a larger number that are either startups or ones that just chew cash up. So I think it's absolutely of a more fragile nature. Does that help? Todd Koffman - Raymond James: Yes, that's very helpful, thank you.

There are no further questions in queue at this time. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a good day.