Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 JDSU Corporation's Earnings Conference Call. My name is Chris, and I will be your coordinator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. And I would now like to turn the call over to your host for today, Ms. Michelle Schwartz, Senior Director, Investor Relations. Please proceed.

Thank you, operator. And welcome to JDSU's Fiscal 2011 Fourth Quarter and Year End Financial Results Conference Call. Joining me on the call today are Tom Waechter, Chief Executive Officer; and Dave Vellequette, Chief Financial Officer. I'd like to remind you that this call will 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 annual report on Form 10-K filed on August 31, 2010. The forward-looking statements, including guidance provided during this call, are valid only as of today's date, 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 the discussion of their usefulness and limitation is included in today's news release announcing our results, which is available on our website at www.jdsu.com. As a reminder, the quarterly earnings press release, slides and historical financial tables are posted at www.jdsu.com/investors under the Financial Information section. Finally, and as a reminder, this call is being recorded and will be available for replay from the Investors section of our website. I would now like to turn the call over to Tom.

Thank you, Michelle. And good afternoon, everyone. JDSU delivered solid fourth quarter results in an uncertain macroeconomic environment. Revenue of $472 million was at the high end of our guidance range and operating margin of 12.3% was near the midpoint of our range. Gross margins of 46.7% were down less than 1 percentage point from the prior quarter and up more than 1 percentage point from the prior year. Cash generated from operations was $56 million. I am pleased with the business model improvement achieved in fiscal year 2011. From fiscal year 2010 to fiscal year 2011, revenue grew 32%, gross profit was up 40%, and operating income increased by over 136%. Throughout fiscal year 2011, we benefited from our collaborative innovation strategy as revenue from new products continued to grow. In fiscal Q4, we achieved record new product revenue with over 71% of Optical Communications revenue and 52% of CommTest revenue generated from products less than 2 years old. Our financial strength continues to provide us with the necessary capital to fund our robust new product pipeline. We generated over $200 million of cash from operations during the fiscal year. As we look ahead, there are several factors causing some short-term volatility for JDSU: First, our general economic conditions and uncertainties; second, our inventory corrections by our Optical Communications customers; and finally, the September quarter seasonality for our CommTest business segment. We strongly believe that fundamental end-market drivers for our products remain strong for the long-term, but, as indicated by our guidance, we are not immune to the current macroeconomic challenges, optical inventory corrections or CommTest demand seasonality. We cannot predict exactly how long this downturn will last for us but we do believe it's a near-term issue. During this time, we will remain focused on our winning strategy, including profitability and cash flow generation while we continue to invest in R&D and new products that will further differentiate us in the marketplace. I'll now hand the call over to Dave, who will take you through the details of our financial performance in Q4 and the fiscal year and will discuss our outlook for Q1. Following Dave's remarks, I will provide more details on our results, the trends we are seeing, and our strategy moving forward.

Thank you, Tom. Before I start, please note that all numbers are non-GAAP, unless I state otherwise. Fourth quarter revenue of $472.3 million was up 3.7% from the prior quarter and up 18.6% when compared to the fourth quarter of fiscal 2010. Revenues increased sequentially in our CommTest and AOT segments and declined, as expected, in our CCOP segment. Book-to-bill for AOT was greater than 1, CommTest and lasers book-to-bill were approximately 1, while Optical Communications was below 1. Book-to-bill for the total company was also below 1. Fourth quarter gross margin was 46.7% of revenue, down from the previus quarter's gross margin of 47.6% and up from fourth quarter fiscal 2010's gross margin of 45.5%. The fourth quarter sequential decline in gross margin was primarily due to product mix within the segments and lower manufacturing absorption in the optical business. The year-over-year improvement in gross margin was due to improved margins in both the CCOP and the CommTest segments. Operating expenses for the fourth fiscal quarter of $162.3 million were 34.4% of revenue, relatively flat from the prior quarter's $161.9 million. Increased R&D investments were offset by lower G&A spending. The fiscal fourth quarter operating margin for the company was 12.3%, up from 9.3% for the year ago period, primarily due to higher revenues and gross margins. Net income was $53.9 million or $0.23 per share, which compares to $51 million or $0.22 per share for the third fiscal quarter and $33.1 million or $0.15 per share for the year ago period. For the full fiscal year, total revenue was $1.8 billion, up 32.2% from the prior year. Gross margin for the full fiscal year was 47.6%, up from 44.6% for fiscal 2010. Operating income for fiscal 2011 was $230.7 million or 12.7% of revenue, up from 7.1% of…

Thanks, Dave. Now I will provide Q4 and fiscal '11 highlights from each of our business segments. I will start with the CCOP segment. First, Optical Communications. I am extremely pleased with the accomplishments of this business. On a year-over-year basis, fiscal Q4 revenue increased approximately 30%, gross margins improved by nearly 3 percentage points, and operating margins improved by over 4 percentage points. We continue to grow market share and grow our product portfolio offerings to support both enterprise and telecom customers. Our achievements are a result of our technology leadership in ROADM, including our Super Transport Blades, and in Tunable XFP and gesture recognition products where we are significantly ahead of our competitors. We expect that in FY'12, our customers will qualify second sources for some of these products. It is important to note, however, that we have negotiated long-term share agreements with a number of customers for our Tunable XFP, and we have one significant customer for our Super Transport Blade. We expect that as the total available market expands for these products, we will continue to benefit. Most importantly, we believe our continued investment in technology and expansion of our product portfolio will keep us ahead of the competition. Currently, the optical market is facing a short-term inventory correction. We still see strength in the drivers for optical products but, in the near term, we will experience a slowdown in demand. Tunable XFPs revenue declined 6% quarter-over-quarter and grew by over 300% year-over-year. Our penetration across the customer base is strong, having shipped to 41 customers to date, up from 37 customers last quarter. We believe demand will remain strong for the long-term as customers continue to design the Tunable XFP into more applications within their optical network. Our Tunable XFP portfolio is the broadest in…

[Operator Instructions] And your first question comes from the line of Kevin Dennean with Citi.

Tom, just wondering if you could address the inventory correction issue. I don't think an inventory correction is new news to anybody who's following in the industry, but I think what's a little bit surprising is that it seems to be hitting JDSU with a little bit of a lag. So could you talk a little bit about what some of the factors are? Is it specific customer exposures? Is it primarily driven by increased competition in tunables, with maybe customers pausing ahead of second sourcing? Any more detailed color that you can give on that, I think, would be helpful.

It does line up with specific customers for specific networks are going out into the field, so it does line up with specific customers. And I think part of it is the fact that we have been single-sourced on a number of products for over a year now and, at some point, we work capacity constraint on those products. So I think during that period there was pretty heavy ordering by these customers to ensure supply of those product, so I think were starting to see some of that built up that happened, and maybe that's part of that lag you're talking about between ourselves and some of our competitors. And I think the other thing is that we've brought our lead times down. I think Dave mentioned, we're down more on the 4- to 6-week range. So at one point, we went well above 12 weeks. So as we pulled those down, as we increase capacity and throughput and our yields improved on some of these new products, tended to reduce the ordering patterns also.

Okay. That's helpful. Just 2 quick follow-up. If we look of the optical component business and we strip out ROADMs and tunables, it looks like kind of your base optical business actually grew a little bit sequentially. In the guidance, how should we think about kind of the mix of what happens within optical components for comm, is it all ROADMs and tunables in the guidance, or are we looking for another lag down in kind of the more base part of your optical component business?

I think, our anticipation is we'll see continued growth in those products. We think there's a lot of replacement going on out in the field, there's new networks going in. So we think over a number of quarters, we'll continue to see growth in those areas. And especially, I think, we've picked up our game in the pluggables area. So I think we'll continue to see growth in that area as well.

I think if you look at it -- Kevin, this is Dave -- for the quarter, we didn't highlight whether specific product sets should be impacted in the September quarter other than we noted that about half of the reduction will come from the gesture products. So when you step back and look at the peak to September number, right, our March number to September is more optical revenue, you can see that the telco-specific products are about down about 10% from the peak, which is the March number.

Okay. And then one last follow-up on lead times. You mentioned that about 4 to 6 weeks. Can you put that in context for how low have lead times gotten kind of in recent cycle lows, and if you can give any color around that?

I think 4 to 6 weeks is getting back to kind of a norm, before we saw the expansion of the lead times, in some case it went above 12 weeks, as I said. So we're getting back pretty much to a norm cycle now, where you have VMI polls, and obviously you're replenishing bins and that's a lot faster for our customer base. But I think on most of the products, 4 to 6 weeks is pretty well back to normal.

[Operator Instructions] And your next question comes from the line of Nathan Johnsen, Pacific Crest Securities.

Two quick ones, if I may. On CommTest, you talked about the sequential decline largely as a result of seasonality. I know in the couple past years, you guys have had some acquisitions that had sort of masked some of the seasonal trends. Should we expect the guidance to be sort of the new normal for September quarter sequential seasonality? Or are there macro issues involved there, too? And then secondly, going to the SFP+ tunable products, you talked about having a lead there, I was wondering if you guys had a sense for how long the you're going to expect to have versus your key competitors?

I think on the CommTest September quarter, I think it is a combination of seasonality but there are some macroeconomic issues there that are also affecting it. So I think it's a combination of both. But we normally do see a pretty good drop on the September quarter from the seasonality. The SFP+, we have -- if you look at Tunable SFP, where we've had a good 12 month, maybe even going on to 18 months lead, we expect a similar type of lead in this product. Again, it's a very difficult product to design, and even as well very difficult to manufacture in volumes. So we believe we have a similar type of lead from everything we could see and understand out there in the field.

We're also very -- we're encouraged by the fact that, again, as you think about the Tunable XFP and now the Tunable SFP, how it's expanded the markets that we address. The tunable XFP has a addressable market of about $600 million annually, and the Tunable SFP will have another $300 million.

And your next question comes from the line of Mark Sue with RBC Capital Markets.

If I could just ask. Does your instincts suggest considering lead times for your customers that, perhaps, the September quarter is the bottom for CCOP, or is it possible that optical component revenues may be down sequentially in the December quarter as well?

I think, Mark, as I noted, we're encouraged by the favorable bookings trends that we're starting to see right now. We didn't give a forecast of what the December would be like, but the fact that now that we have lead times, but they're not likely to get much lower than we're they're at, and the capacity we have available to us and now we're seeing favorable bookings trends. So it's encouraging, but we really didn't go out and forecast what the December look like.

The improving bookings trend, would that be some catch up? Would it be new projects? Would it be broad-based customers? Any additional thoughts on that would be helpful.

Yes. I would say it's pretty well across the customer base, we're starting to see that starting to happen. Again, it's not a lengthy trend, but it is encouraging to see that pick up.

And I think the other point is, as you know in optical, about 10 customers make up 70% of your revenue. And some of the customers that had -- were not ordering before are now starting to order. So that was again one of the encouraging trends.

And your next question comes from the line of Alex Henderson with Miller Tabak. Alex Henderson - Miller Tabak + Co., LLC: There's a couple of things I wanted to just get some clarification on. First, following the comments that were just made. Is it reasonable to think that given the improving bookings orders, or the order trajectory that you mentioned, that the book-to-bill in your September guidance for the Optical segment would be at or above 1 based on what you know at this point? And then a second question. I wasn't sure what you said in the call and I was wondering if you could just clarify it. Did you say that you expected the CommTest margins to be in range in the December quarter with your target guidance, long-term target guidance?

This is Dave. I'll handle the second question first up. Yes, we did say that we expect the Test and Measurement business to reach their operating margin range in the December quarter, provided the revenue has hit that range, which is 215 or greater; and gross margins hit their range, which is the 57% to 61%. We did say that. As far as a book-to-bill for the September quarter, we did not provide one. And we're seeing more and more of our business in the VMI area. So we're really not talking giving guidance on book-to-bill. I think that the key here is that we're encouraged to see the improving trends in the bookings and that we're seeing customers that weren't ordering from us just a little bit ago, now starting to place orders with us.

And your next question comes from the line of William Stein with Crédit Suisse. William Stein - Crédit Suisse AG: I hate to be the fifth one to ask about this, but maybe you could give a little bit more clarity around the bookings trend in the optical components business. When you say its been improving and some customers are coming back, can you talk about linearity of bookings throughout the quarter, and how it's done in August month to date?

I mean that's when we're starting actually, in August here month-to-date, that's when we're starting to see it pick up. So prior to that it would remain fairly slow, but we do see a normal pattern that we're back-end loading. And as Dave mentioned, I think last quarter, we're up to 27% VMI, revenue from VMI. So we're seeing VMI go up and, at the same time, though, we did see the bookings pick up in the August timeframe. We do typically have a back-end loading with bookings.

And your next question comes from the line of Subu Subrahmanyan [ph] with Sanders Morris.

On the CommTest side, I wanted to -- of the seasonality you had mentioned, how seasonality is having a negative impact on September, in addition to macro factors. And I'm wondering if you think seasonal patterns hold for this year, for December, which is typically a strong seasonal quarter. I realize you're not guiding to it but any qualitative commentary, especially given carriers suggest that they lower the normal second half ramp versus first half?

Yes. We're not giving guidance for December quarter. But typically, the year-end flush in the December quarter comes mostly out of North America. And from what we're seeing and hearing from North American major network operators, we don't have any indication that, that's going to be much different this year. So nothing at this point that would give us cause on the negative side but, again, we have limited visibility out into the December quarter.

Yes. We're not quantifying at dollar level of the flush, but it's setting itself up to have a normal occurrence of a flush.

And your next question comes from the line of Kim Watkins with Morgan Stanley.

This is Kim in for Ehud Gelblum. Just wanted to first ask about the Tunable XFP market. It's interesting that you said that you have secured share guarantees but if you could give some commentary on what you expect for pricing, that's number one. And then secondly, I just wanted to follow-up on the pretty sharp decline in ROADMs, if you could give a little bit more color on what you saw maybe from a geographic perspective, because it caught my eye when you said the optical business was actually up in APac and down in North America.

I think on the Tunable XFP, typically, on where we've secured some future business, it's typically volume and pricing that we sign up to with the customers. So we have a pretty good visibility from that perspective on both volume and pricing. I think on the ROADM side, it was mostly tied into both the macroeconomic weakness and some of this inventory burn-off. So it was reasonably spread across geographic regions, but I'm not aware of any particular kind of hotspot as far as being down much more than other areas, one geographic region being down a lot more than another area. Dave, I don't know if you want to add?

I think the thing to remember in Asia-Pac, we talked about CCOP, we talked about the fact that lasers had good growth and we also talked about the growth in the gesture products sequentially, so those tend to ship in the Asia region.

And your next question comes from the line of Cobb Sadler with Catamount Advisors.

Just I had a question on, again, on the XFP tunable. Is it -- the down, I believe, was 6% quarter-on-quarter, is it inventory or competitive design wins? And I guess mostly revenue has been fixed XFP replacement but what about the 300 pin replacement market, it sounds like there are some other competitors that are targeting that market. And so I guess that's the first question.

I think on Tunable XFP, it's mostly macroeconomic conditions. We're only aware, really, of one competitor out there that said they had any revenue of any size in this past quarter and it was smaller than what they had expected. So I don't think much of any of it is due to market share loss there. It's just primarily the macroeconomic conditions at this point. We do know the competitors coming on. We're aware of that. Again, our focus is to keep evolving this product very quickly, so we stay ahead of the competition, and I think we're showing that we are doing that.

I think the other thing is, as we've said before in the fixed, it's about a $100 million a year opportunity in the Tunable XFP. And in the 300-pin replacement, that's about a $500 million a year opportunity. So and we are selling into both at this time.

And your next question comes from the line of Ajit Pai with Stifel, Nicolaus. Ajit Pai - Stifel, Nicolaus & Co., Inc.: Just one question and then -- just looking at the macro effects that you said are also impacting your test and measurement business, outside of the seasonal ones. Could you give us some indication as to what you're seeing in the change in behavior from the carriers and the deployments. And on the same note, you talked a lot about the Infonetics numbers, about increased broadband all of that over the next 3 to 5 years. But in the intermediate term, could you sort of walk us through how carriers are thinking about their deployment sizes. Most of them broadly sort of slowing down in terms of pushing out their deployments, so they're pulling their pin? And most of the work that you're doing with them right now, how are they -- what period are they focused on in terms of accelerating some of sort of transition to next generation, like 40G/100G as well as 4G and LTE?

Yes. I think first of all, in the macro T&M, it was a bit more skewed towards the European region where I think as you can tell, there are probably heavier macro concerns today, so I think it really is some delays in spending related to those macro concerns. I think there's still a lot of additional broadband requirements in the networks in Europe and that needs to be addressed. But there is some just being conservative, I think, in the short-term spending. But it did impact us across the world but probably most significantly in Europe, from what we saw on T&Ms, specifically. I think as far as the broadband deployments, I think what we see from the operator, they haven't changed any of their plans. They are still planning to pretty aggressively roll out additional capacity, additional networks, and what we've seen from sales of smart devices out there in the market, they continue to be deployed at an increasingly rapid rate, so we the know network's are in pretty difficult shape. They need to be expanded and the capacity added. So I think there's only so long that investments can be delayed into these networks.

And your next question comes from the line of Todd Koffman with Raymond James. Todd Koffman - Raymond James & Associates, Inc.: Can I just get a clarification in your response to the Alex Henderson question on Test and Measurement for the December quarter. You said you expect to meet your operating margin target range of, I guess, 20% to 23%. And, Mike, just a follow-on to that. Since it sounds like you got fairly good visibility, if that's what I heard you say, in the December quarter test budget flush, is it a stretch to say that the revenues in CommTest would be flattish to up year-over-year?

Dave, did you want to talk to the business model and then...

Yes. We did say it on the call and to Alex that we expect to be in the operating margin range for the December quarter for test provided the revenues are above the 215 level and that the margins, or the gross margins are in the range of 57% to 61%. That is what we said on the call.

I think as far as what we expect to happen in the December quarter, what we said was that we don't see anything that would indicate that the operators wouldn't have somewhat of a normal budget flush in that quarter. They all -- the major, because most of it comes out in North America and the major North American network operators have not given any signals other than a probably a normal type of period in the December period. But again, we do have limited visibility. So that's why we don't give guidance out into the December period.

And your next question comes from the line of Joel Achramowicz with Blaylock Robert Van.

Tom and Dave, I just had a couple of questions. There seems to be a lot of interest now in coherent DP-QPSK transceiver technologies for 40 and 100 Gig. And is that -- perhaps that interest now, causing any type of a pause now the supply chain for maybe some of the carriers that want to look at a more productive, more efficient transceiver throughput?

From our observations, we haven't seen anything that's indicated there's been a pause waiting for that technology to hit the market in volume. So we haven't seen any indication of that at this point, Joel.

And at this time, there are no further questions in queue, and I would now like to hand the call back over to Mr. Tom Waechter for closing remarks.

Thanks, operator. As our call concludes, I have some final comments. JDSU delivered a solid fourth quarter as well as full year results. I am pleased with the progress we are making towards our target operating model, as we continue to benefit from our new product introductions and our focus on operational excellence. Soft economic conditions and inventory corrections by our Optical Communications and gesture recognition customers are negatively affecting near-term results, but we strongly believe that fundamental end-market drivers for our product remains strong. We expect broadband infrastructure growth to continue based on demand from broadband, from bandwidth-intensive applications, and we are well-positioned with our portfolio of products. We will remain focused on profitability and cash flow generation and we will continue to invest in R&D and new products that will further differentiate JDSU in the marketplace and we will benefit the company over the long-term. In closing, I'd like to thank our employees for their hard work and commitment and contributions to JDSU. I would also like to thank our customers, partners, vendors and our long-term shareholders for their continued support of JDSU. I want to thank you for your taking the time to join us on this earnings call, and we appreciate your interest in JDSU. Have a good evening.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.