Good day, ladies and gentlemen and welcome to the JDSU Fiscal 2008 Fourth Quarter and Year End Earnings Conference Call. My name is Amay [ph] and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-session towards the end of this conference. [Operator Instructions]. I would now like to turn the presentation over to your host for today's call, Ms. Michelle Levine, Director of Investor Relations. Please proceed.

Thank you, operator and welcome to JDSU's fiscal 2008 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'd 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 expectation. We encourage you to look at the company's most recent filings with the SEC, particularly the risk factors section of our report on Form 10-Q filed May 6, 2008. The forward-looking statements including guidance provided during this call are valid only as of today's date, August 20, 2008 and JDSU undertakes no obligation to update these statements as we move through the quarter. Please note that all numbers are non-GAAP unless otherwise stated. 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 Investors portion of our website at www.jdsu.com/investors. I would now like to turn the call over to Kevin.

Thanks, Michelle and good afternoon. JDSU's results for fiscal Q4 and for the full year of 2008 reflects year-over-year improvement as well as further opportunities to advance our financial model and reach are desired, sustainable long-term financial targets. Highlights for JDSU's fiscal fourth quarter non-GAAP results include but are not limited to revenue of 390.6 million, near the middle of our stated guidance range, representing 11% year-over-year growth. Test and Measurement represented 44% of total revenue, Optical Communications 37%, AOT 13% and lasers 6%. Gross margins for the quarter were 40.9%, down from 42.6% in the fiscal Q3 and up from 37.4% in fiscal Q4 07. Year-over-year, all four businesses improved their gross margins. Operating margins of 2.2% compares to our 1.2% operating loss for the year ago period. Once again, all four business segments saw positive operating margins. JDSU's adjusted EBITDA as a percent of revenue was 6.4% compared to 3.3% for the year ago period. The company was free cash flow positive for the sixth quarter in a row. Book to bill for the company as a whole was greater than one, all four business segments had a book to bill greater than one. We continued to have strong geographic diversity and less than 50% of total revenues came from North America. For the full fiscal year, non-GAAP results show revenue exceeded 1.5 billion, growth of approximately 9.5% when compared to revenue of 1.4 billion in fiscal year 2007. Three out of four segments saw a full year revenue growth in fiscal 2008 compared to fiscal 2007. The CommTest segment grew 12%, Optical Communications grew 6% and Advanced Optical Technologies grew 21%. Gross margins grew to 42.8% in fiscal 2008 compared to gross margins of 37.7% for fiscal 2007. Gross profits of 655.7 million, representing 25% growth from…

Thank you, Kevin. Before I start, please note that all numbers are non-GAAP unless I state otherwise. Fourth quarter revenue of $390.6 million was up 1.7% from the prior quarter and up 11.3% when compared to the fourth quarter of fiscal 2007. Fourth quarter growth was driven by the Optical Communications segment. In the fiscal year, total revenue was $1.53 billion, up more than 9.5% from the prior year's $1.4 billion. In fiscal 2008, we saw growth in all geographic regions and in three out of four business segments. Our Test and Measurement segment grew 12%, the Optical Communications segment grew 6%, and Advanced Optical Technologies grew 21%. Our Commercial Lasers business declined 9% due to the lower demand from our semiconductor equipment manufacturing customers. Fourth quarter gross profit of $159.8 million or 40.9% of revenue was up from the fourth quarter 2007 gross margin of 37.4% of revenue, but down from the previous quarter's gross margin of 42.6% of revenue due to the CommTest product mix. For the full fiscal year, gross profit of $655.7 million or 42.8% of revenue was up 24.5% from fiscal 2007's $526.5 million or 37.7% of revenue. All business segments except for Lasers improved their gross margins in the fiscal year. Operating expense for the fourth fiscal quarter of $151.4 million or 38.8% of revenue was up from the prior quarter's $147.6 million. The increase included a full quarter's expense from the ABNH acquisition and temporary expenses associated with change management initiatives, our ERP upgrade activity and incremental legal costs which were primarily associated with the patent litigation settlement. These temporary charges represented approximately 1.5% of revenue. Operating income for the quarter was $8.4 million or 2.2% of revenue, up from fourth quarter 2007's operating loss of $4.3 million, but down from $15.9 million…

[Operator Instructions]. Your first question comes from the line of Ehud Gelblum of JP Morgan. You may proceed.

Hi, thank you. Can you hear me okay?

Hi Ehud.

Hi guys, how are you? A couple of questions if I could. First of all, on the last two things that you just said that I thought [ph] were kind of interesting. The pushouts in Test and Measurement into Q2, if you go in a little more detail. Are those things that you closed this quarter and then were supposed to ship next quarter, but you are now shipping the following quarter? When will actually close in terms of revenues? And is that a sign of other things, extending sale cycles or anything of that sort? How should we be taking that? And then I have some questions... and then the second question I had on the things that you just mentioned now was that the new head count reductions and the new rightsizing that you just talked about that would add 3 points of margin. You are still going... you are still targeting the 10% plus operating margin ending the calendar year. So are we to understand that previously, you were aiming for that 10% plus without having to do this and now you are counting on some more reductions to help you to that 10% plus? So does that reflect... the gross margin is still the same... does that reflect a different mix that you are expecting or am I misunderstanding the way the business works?

Ehud, I think we have the gist of it. I am going to let Dave answer the second one. I am going to try to answer the first one. I think you may have actually posed two questions, and if I get it wrong, I apologize. But I think the... it sounded like there was a question in our prior conference call, we had had CommTest business that had escaped beyond the boundary of the quarter. The message there was the majority of that business closed in fiscal Q4. So was that a indication of some of the smaller but more cautionary spending from some of the smaller carriers in North America for CommTest having larger or longer approval cycles? It is. But the real message is in general, those things that we targeted closed, and so let me put that aside. The second piece was what Dave had mentioned in his guidance was that there are certain product lines such as ROADMs and tunables where the forecasts have been rising faster than the increased capacity that we've been building. And so we've found ourselves in a supply constrained mode for fiscal Q1. And about 10 million of that we have scheduled into fiscal Q2 despite the fact that the customers have asked for it earlier. So I mean separate [ph] items. I hope I was clear on those two. Dave, you want to take a crack at the second question?

Yeah, Ehud, you asked about the 3 points of operating profit opportunity. So the temporary charges, we noted those in the previous call, so I was just reiterating those. And I think this is the first time we have put a percentage impact of what those charges are. And the rest of it is actions we're taking so that as we... if experience any jitter in our revenues due to economic uncertainty, we have provided so that we can still meet our model.

Okay.

The real measure there [ph] Ehud is that, as you can see, our predictability struggles if there's large mixes, swings in mix. And so some of the work we're doing is just to try to cushion us against the large swings in mix. Okay?

Okay.

Thanks so much.

Next question please. Operator: Your next question comes from the line of Cobb Sadler of Deutsche Bank. You may proceed.

Thanks a lot. On your comments on the enterprise business being a little bit weak, I am assuming that's SFP plus. And can you talk about... is that kind of across the board or is it... you have one or two kind of major customers that maybe digesting some inventory are slowing down a little bit? Then I have a follow up. Thanks a lot.

Yep, Cobb, I would say that it reflects SFP plus but also other codes or putables. And it is certainly reflective of more than one customer. I don't think we are best beacon for the directionality of that market. But at least if I were to take your question and aim it just specifically to our experience, it's more than just the SFP plus and it is more than one customer. Okay?

Okay, great. And the Picolight business, is it more... I mean is it transceivers or vixels at this point. If it was more vixels when you bought it, would you say that's changed or not?

No, I would say that the revenues are still driven by modules and transceivers, however our growth and success is more measured today by the... our diversification of our customer base with net source. Okay.

Okay, great. Thanks a lot.

Your next question come from the line of John Harmon of Needham & Company. You may proceed. John Harmon - Needham & Company: Hi there, good afternoon.

Hi John.

Hi John. John Harmon - Needham & Company: You had a couple of restructuring charges in the quarter and you were talking about your lean manufacturing program. Which are the areas that you are targeting for the most cost reduction or oil where you might have the greatest opportunity?

John, let me break it into two, only one of the two can I answer and I'm going to ask Dave for help. In terms of looking forward, I'd say the primary areas were where we have deterministic plan from timeline is on the movement towards a greater use of contract manufacturing for our CommTest business. And that will take two things as we say in the script, there would be some R&D side consolidations and then from our gross margin and lean perspective, cash flow improvement perspective, the consolidation and very use of contract manufacturing, that side would be the most significant. Dave, relative to the specific charges in this quarter, could you help John on that?

Yeah. They were approximately evenly split between the CommTest area and the Optical Communications area and the related reductions of head count and facilities. John Harmon - Needham & Company: Okay thank you. And just one quick one, if I may. In terms of your ROADM unit volume, is it still predominantly your PLC ROADMs so you're seeing good growth in other technologies like liquid crystal?

No, I'd say our predominant technology in terms of share and shipment volume is with... is a MEMS switching based technology, so those are the wavelength selectable switches. We have some... the liquid crystal that we have used in the past was more for the core and long haul application which is a smaller piece of the market, the Metro applications have greater and that's mostly a MEMS switch. And you are right to observe that as we continue to go market... go down market, there will be multiple technologies that we compete which will be liquid crystal, thin film and MEMS. So we are fortunate to have most of those technology in-house. Thanks, John. John Harmon - Needham & Company: Great, thank you.

Your next question come from the line of Mark Sue of RBC Capital Markets. You may proceed.

Kevin, do you think the business linearity is getting any better in the CommTest division, if anything it seems to be becoming more seasonal and any thoughts on why the weakness from the Tier 2 carriers may be temporary? And David for you, where is the confidence coming from on your long-term gross margin targets? It seems like a steep climb to 43 to 47%. Is some of that related to just kind of the near term mix and recovery of the Test and Measurement?

Let me take on the predictability side of CommTest in particular. I'd say one of the challenges of helping people through our model is that we did have this very, very significant surge in cable as you will recall. CommTest grew... has basically doubled in the three years that we have owned the Acterna asset and in the last fiscal year, we grew on the order of 25 plus percent. So coming off of that surge, which was cable related, we see slower overall growth. On the other hand, as we try to point out, if you were to take that surge out, our growth was actually on the order of 15% year-over-year. So normalized for a telecom market, we feel pretty good with the predictability in the fact that its operating with the model. If there was any thing that we are going to continue to focus on in terms of predictability within this business will be two. One is, this should be a place where we continue to have significant improvement in gross margins or shall I say, we shouldn't have fallen out of our target range this particular quarter. I think moving to a greater contract manufacturing dependence will help us with that. The second thing is in terms of the mix of that business, as it moves and diversifies away from just field service, but has a services component to it and a lab and production, we'll begin to modulate the seasonality to your point. So those were the... those are really the two pieces. Dave, you want to pick up on the gross margin question?

Yeah, on the... my confidence of getting to the 43 or 47, as noted, we did improve the efficacy of the model in the December quarter. In the March quarter, we were just under the 43% range and we believe that with the steps we're taking, as Kevin just noted, you go to more contract manufacturing and to, as we noted, the laser business moving to Asia manufacturing, we believe that those are steps we're taking that will help get us into that range on a sustainable basis.

And there is nothing--

This year we've finished at an average of 42.8 for the year. So if you take Dave's summary at the end of each business where he is arguing that there is a one to two, in some cases five or more points increase, the title will just continue to raise and will move from that 42.8 to 40... in the middle on that range. Okay?

Okay, thank you.

Your next question comes from the line of Jeff Evenson of Sanford Bernstein. You may proceed.

Hi. One mechanical thing and then a more general question. On the mechanical thing, if you could go over your share buybacks and, at least from our first look, your share count went up and just explain how that happened. And then second, wondering if you could go through some of the initiatives that are going to help your overall predictability.

Okay. So the share count going up is probably primarily because of the fact that we finished the ABNH acquisition in the third quarter, but buybacks started late in the fourth quarter. And so it becomes just literally a weighted average, right. We expect that the weighted shares outstanding fully diluted in the first quarter will be closer to the 222 to 223 range. Is that right, Jeff?

Right. Yes, yeah. Absolutely.

Jeff, let me help you with the predictability. There is basically six, I would say, initiatives from my vantage point that we have comprehended and are in some level of execution on. The first is probably the most obvious one to eliminate supply constraints. So our story and our numbers would be somewhat different obviously if we were not constrained by capacity. The second is to raise the gross margin and lower the OpEx such that the modality of the gross margins is not as wide as it is today. I tried to enumerate those site consolidation, contract manufacturing, dependency [ph] increase and just minimizing the swings. So that's sort of a mix and just basically pulling out some of the overheads at the [ph] company as mix shifts. The third is to drive greater utilization and be more cognizant of managing backlog as you maximize the utilization through each quarter. In general, this is such a book and ship business, the disciplines of managing the utilization of the facility is less well developed than you might guess. The fourth is to improve the mix, as I mentioned, in CommTest, moving to a greater mix of lab and production, which, as I mentioned, that was our fastest growing piece. That will help over time as well as services. The fifth is to improve the execution precision, two things, the Oracle and IT visibility and hubbing. Today, some times to figure out where we are in rev rec or bookings, it just takes too long because some of the pieces of the company that not fully integrated it takes a little bit longer to make discussions on. And then lastly is that it certainly would help if all markets were flat to up rather than some being snorky such as... so a little bit of help from wind at our back. So those are the six areas that will improve predictability. Hope they help.

I am wondering on your decreasing this... or eliminating supply constraints and increasing utilization seem on the surface to me potentially mutually exclusive.

Well the problem is is that if you have supply constraints, you often have pieces of the process sitting there and waiting. So the more that you can ship you're not absorbing the revenue in the quarter and in fact you've got people and processes and equipment just sitting there for downtime. So you almost get a double negative in terms of the absorption. Okay?

Your next question come from the line of Ajit Pai of Thomas Weisel Partners. You may proceed.

Yeah. Good afternoon.

Hi Ajit.

Couple of quick questions. I think the first one is just a dressing on the margin side. What's happening in the pricing environment both in your Communications Test and Measurement business as well as your Communication Products business, the Optical business?

In the T&M, we don't see much of an ASP effect other than what we'll see is a maybe a deal specific activity that we win and then it's more mix, right? Somebody get the deal with the certain mix and if we have our weighting towards mix, that's really more of what we see in the T&M area. In the Optical Comms, we've been running in the 2 to 4% range for a very long time. In this last quarter; we're at the higher end of that range.

Got it. So then what... when you look at your business mix right now, and the fastest growing business that you have is your Communication Products business and that has the lowest margins. So if that continues to be the fastest growing business, unless you feel otherwise, I think you indicated that that will be the fastest growing business. What would get that gross margin up to the range that you're increasing your target to?

Well, there is a couple of things. One, we're working on the margins as we said in all the groups. Two, we did note that the CommTest market, we need to get the CommTest business up to 45% of the revenue mix and we believe there is... we can get some margin leverage in that area. Also we're looking in fact at, looking to engage in more at the CMs in that area. So those are the areas that are... one we have to... the mix has to change as you noted that have more CommTest in it than it recently did and all areas we are working on improving the margins.

Ajit, let me make sure I am clear. I think both the Optical Components market and CommTest market are capable of growing 5 to 15% per year. We've demonstrated that. In fact if you look over the last three years, you'll find out that we have one year where the CommTest market grew faster than Optical Comps. Secondly, the notion of the mix favoring CommTest is I think here to stay, so I think we will continue to see it in the 40s and over time continue to migrate to the 40s. And then third, in every business there is gross margin improvement. And basically the notion of leveraging more contract manufacturing is basically the notion of sharing unemployed overhead within industry rather than within yourself. And so we... there is plenty of opportunity within the company for that. Hope that helps.

Your next question come from the line of Paul Bonenfant of Morgan Keegan. You may proceed.

Hi, thank you. Actually I have a two part question. First, as you mentioned that 40G was helping CommTest, and I'm wondering if it's also helping your Op Comp segment specifically through the Menterra [ph] relationship. And the second part of the question is more philosophical in nature I guess, when we have this discussion next quarter given the consolidation that's going on in the Optical space, it looks like JDSU which has been holding the top spot for the Optical Components market for the last eight years or so, will hold the number two spot behind the merged Finisar-Optium and Opnext and StrataLight will be nipping at your heels. And I am wondering if you think this is a... if you ventured a true era of consolidation here, or maybe these are opportunistic grabs and if perhaps they let you to reconsider or change of strategy with regard to M&A in the optical space? Thank you.

Yeah, I'd try and take it. In terms of 40-Gig it absolutely helps the entire company. I'd say the greatest benefit to us is... it's been a great growth driver for the testers as you know carriers tend to drive out new services and access methods in wave and so that was a wave for CommTest. Second is on Optical Components, we have at the transport layer and the IP photonic layers, things like modulators we sell almost independent of speed. And so 40-Gig just is another new speed that requires ROADMs, new modulator so forth and so on. And so that has been very positive for our Optical Comms. And as it relates to Menterra [ph], I also good, the benefit, I think we have helped the Menterra [ph] relationship become more and more relevant to the industry. So that's a positive. And we've also positioned some of our tunable technology as a recipient of future business with Menterra [ph] as well. So I think there is sort of three levels of positive on that. Relative to industry consolidation and size, let me share with you our thoughts. Number one, in general, we would observe that making money in optics is as much about what you chose not to do as what you chose to do. And so we have chosen where we have decided to play in order to make sure that we continue to improve our profitability and make money. So being number one or two or three is less important than being excellent at what we do and being profitable at what we do. The second question regards to the trend towards consolidation. And I would observe for you that whether you call it consolidation or diversification, most of the asset combinations that have occurred have occurred primarily over the last 12 months in the transmission segment. So whether it was JDSU and Picolight, EMCORE and Intel assets uplink in OCP, Optium and Finisar and so forth, you are correct that there has been a dramatic combination... set of combinations in the transmission segment versus transport for... versus the photonics layer. So we have participated in it. We got a vixel position out of it, which is a leadership position. Do we wish to perpetuate or do further combinations within the transmission segment? Certainly not at this time. So we are going to continue to build our portfolio where we think we can make money. But if you are specifically asking me will we add one more foot to the transmission combinations, we already participated once early in the cycle, not inclined to do that at the moment. I hope that helps.

Your next question comes from the line of Sam Dubinsky of Oppenheimer. You may proceed.

Hey guys. So it seems like a muted service provider spending environment is impacting the test business a little bit. And so I guess my question is it seems like telecom demand on optics, component side is holding up pretty strong. Is there any chance that we are seeing double ordering as you guys are currently capacity constrained? And then I have a follow-up question.

Yeah, let me take both of them. I think there is a... if you were to think about three forms of the market, and I am referring now to your... the way that you phrased the question around the test and measurement piece... one where you've got the wind at your back and every customer that you have is buying more every quarter. We are clearly not in that particular spot. The other is where every customer is running for the hill, and we are nowhere near that. So we're in the middle of this where there is a balance. The positive has been the bigger players have been buying more than at a faster pace than the smaller, more cautionary people have been cautious with their spend. Could that shift slightly, could... or could it impact the company in terms of lumpiness if there was a wrong... if their positioned well with the wrong guy at the wrong time? Absolutely. So we do see that this is not wind at your back across all fronts. But it's been an okay environment for us. Hence we grew 15% year-over-year when you take out the cable industry. On the Optical Comm side, it has been good. Is it possible there is double ordering? It could be. I am not aware of any. In general, there is enough differences in the specsmanship of these new devices, whether they are ROADMs or tunables that the actual operating characteristics when they are in the network equipment manufacturers product can be quite different. And there is a lot of testing and Telcordia certifications that go around those. So I would say that it's a little bit less likely with these new areas, but this wouldn't be the first time that I am surprised by something. Hope that helps.

Okay. Yeah, that helps. And just one last question. When you guys are targeting sort of... it seems like growth is coming from outside North America. I know that North America is generally slow. Is any of that growth related to or impacted by a soft U.S. dollar? If the dollar were to rebound, does pricing have to change for you guys to spur demand in other regions? How should we think about currency going forward and how that impacts your business?

Yeah, we do have a portfolio of currencies that we do business with. So we haven't seen a dramatic increase in revenue or decrease in revenue as the dollar shifted around. It was favorable as the euro got significantly stronger very quickly that was obviously a favorable impact for us because we were selling the equipment in euros. And right now, I know the euro has come back. But the effect is pretty small; not very significant, less than a percent.

Okay, thanks guys. I appreciate it.

And your next question comes from the line of Todd Koffman with Raymond James. You may proceed.

Thank you very much. Most of the telco carrier and systems vendors have actually been quite cautious with their spending. But the--

Todd?

Hello?

This is Todd and this withdraws from the call.

He's dropped. Todd dropped from the call. Is there any other person in the queue?

And you have no more questions at this time.

This concludes our call. Thank you for joining us.

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