Welcome to the Xerox Corporation second quarter 2009 earnings conference call hosted by Ursula Burns, Chief Executive Officer. She is joined by Larry Zimmerman, Vice Chairman and Chief Financial Officer. During this call Xerox executives will refer to slides that are available on the Web at www.xerox.com/investor. At the request of Xerox Corporation, today's conference call is being recorded. Other recording and/or re-broadcasting of this call are prohibited without express permission of Xerox. After the presentation, there will be a question and answer session. (Operator Instructions) During this conference call, Xerox executives will make comments that contain forward-looking statements which by their nature address matters that are in the future and are uncertain. Actual future financial results may be materially different than those expressed herein. At this time, I will turn the meeting over to Ms. Burns.

As many of you know, I took over the CEO role at Xerox on July 1. With 29 years of Xerox tenure under my belt and the great benefit of working side-by-side with Anne Mulcahy, I am both humbled by the trust the board has placed in me and honored by the opportunity to lead our company now and well into the future. We made progress in the second quarter managing through the challenges of the global recession by focusing intently on cash and earnings while investing for growth. Please turn to slide four and we'll get started. We delivered $0.16 earnings per share, $609 million in operating cash flow, and a one point increase in gross margin. All of this reflects the strong flow-through of our cost reduction initiatives and operational improvements. At the same time, our industry continues to face challenges from the decline in enterprise spending on technology. This is delaying purchasing decisions and slowing demand for document related supplies and support. Xerox has seen sequential improvement with revenue up 5% from the first quarter of this year. And our clients are increasingly responding to the up to 30% savings we provide through our managed print services. We believe it is imperative that we continue to innovate and build market place momentum for when the economy starts to improve. That's why we're continuing our steady drumbeat of product launches, 12 through the first half of this year including the Xerox ColorQube that cuts the cost of printing a color page by up to 62%. Let me take a moment to review our Q2 results. Larry will then share more detail about our financials, I'll provide some guidance for next quarter then Larry and I will take your questions. So please turn to slide five for a summary…

At the first quarter earnings call we discussed the challenges of the current environment, as well as the difficulty in projecting the future results. We said we would assume no change on our revenue trend. We would focus on areas we could control, cost and expense, cash, and strive for sequential improvement across the board. We targeted ourselves to achieve more total revenue in second quarter than first. We delivered $177 million more. We targeted ourselves to lower our cost and improve gross profit margin. We delivered 40.2 versus 38.9 in Q1 and up a point from last year. We targeted significant expense reductions. We delivered $224 million year-over-year in second quarter, $171 million of constant currency versus $109 million in Q1. We targeted ourselves to deliver at least $0.10 to $0.12 of earnings per share. We delivered $0.16 of earnings per share. We targeted ourselves to generate at least $300 million of cash flow from ops. We delivered $609 million. These results demonstrate the strength of our business model. Slide eight. We continue to aggressively drive for revenue in all parts of our business while recognizing the economic realities. Although demand is lower and decisions are delayed, our product line and services are as broad and competitive as they have ever been and we continue to win in the marketplace. Our focus on cost and expense reductions is yielding. Our gross profit margin was 40.2%, an increase from Q1 and last year. Cost reductions, coupled with mix, more than offset the impact of a stronger Yen. RD&E and SAG expense, excluding bad debts, declined $224 million with $53 million held from currency. Again, our focus on restructuring and discretionary reductions is yielding. Bad debt increased $46 million from last year, but is basically consistent with Q1 at about 1%…

Here's a closing summary of the quarter. We are pleased with EPS, cash flow, gross margin and operational improvements that delivered solid bottom line results despite continued revenue challenges. These results reflect the strength of our model and the resolve of our people. So our Q2 performance positions us well to deliver full year guidance. Third quarter is seasonally our slowest on revenue. So Q3 requires continued discipline in cost and expense management and prioritizing cash. Building marketplace momentum also remains a priority and we'll maintain our focus on value-based offerings like managed free services and document outsourcing. This, along with the breadth of our technology, expanded distribution, and global account management gives us confidence in the strength of our long-term competitive position. With that, we're setting third quarter guidance at $0.10 to $0.12. We continue to expect full year 2009 earnings to be in the range of $0.50 to $0.55. Thank you for your time. Now, Larry and I will be happy to take your questions.

(Operator Instructions) Your first question comes from Richard Gardner - Citigroup.

Larry and Ursula, aside from a seasonal revenue decline in Q3, could you walk us through the dynamics that are prompting you to guide earnings down sequentially?

It's primarily, the seasonality of our business revenue and gross profit are weaker in the third quarter. One issue, we've also over delivered on the cost and expense savings in Q2. We do expect to deliver a strong cost and expense savings in Q3. We do start to lap some of the benefits that we did in quarter two of last year as well. So weaker revenues sequentially, weaker profits sequentially, little bit of negative headwind from currency, and cost and expense savings still being pushed, I think, get us to the point where we're at 10 to 12.

It sounds like you're expecting gross margins down sequentially, and I'm wondering why that would be the case given probably continued yield from negotiations with Fuji Xerox, as well as a more favorable dollar yen relationship in the quarter and perhaps a full quarter benefit of that. And then maybe if Larry could give us a little bit of a sense of how SAG should trend sequentially as well, it seems like it should be down given that you've got continued restructuring savings, as well as a seasonal decline in revenue.

I think on the gross profit margin, what you see in the third quarter is seasonally less revenue. And when you have less revenue, particularly on the wholesale side, it tends to fall right through because you have to keep your cost level there because you go into the fourth quarter and the revenue goes up and there's a lot more work there. So you tend to see, that's why the margin always goes down in the third quarter because you're losing predominantly on the post-sale seasonality in the quarter and that just affects the margin. I don't expect it to be a huge effect, but it is an affect and that does make it lower, and that really drives the answer to why earnings per share would be down in the quarter. On the expense side, I think there would be sequential improvement. It wouldn't be a huge number but you also have the currency less from a spot rate standpoint right now in the compares year-to-year, so that would take the expense back up. And so I guess we're assuming that you wouldn't see a huge sequential decline there, it would be moderate. And I think the combination of that gets you to the earnings per share that we are expecting in the quarter.

As far as the Fuji Xerox cost savings flow-through, we've been successful in negotiating some good cost reductions from Fuji Xerox. We don't believe that we'll get significantly better news or additional news from Fuji Xerox going forward. They're struggling like we're struggling and their economies are struggling like our economies are. So we're working hard with Fuji Xerox, but not additional significant cost savings.

And that's another point, the equity income sense that [inaudible].

Your next question comes from Shannon Cross - Cross Research. Shannon Cross – Cross Research: [Audio gap] hearing from your end customers about page volumes, demand for color, where they're printing, what they're printing. And then also any thoughts on how they're looking at leases, pushing them out a year and just sort of in general what your customers are saying.

Good question on page volumes, color, mixes, business, etc. Most of the impact that we're seeing on page volumes is in production mono, significant impact in production mono. It's a transactional business, the economy is hitting right in the middle of that segment, right in the heartland of that segment, so M&A things, legal business, training, employee onboard, and all of those types of activities which serve the production mono business well are down in this economic time. The good news about the business, the install base is there, the people still have the machines. When the economy starts to turn up, we do expect – when it starts to rebound we do expect that our technology will be used more and more. Office, on the other hand, is a position of strength for us. I said in the talk that we grew our position in segment two to five, our position in colors, in office stays strong, so color in the office and black and white new office is good, biggest hit in mono. Page volumes overall, monochrome down, color down significantly less so holding up very well across the board, both in office and in production. Leases pushing them out, we do see technology refresh on a longer cycle, so people are holding onto their technology for a longer amount of time. On the positive side, they are not canceling their contracts, though, they are holding that equipment. We do think that when business volumes start to rebound that we will see customers being more open and more capable of upgrading their technologies.

Larry, could you talk a little bit about how we should think about working capital and the various different parts of the balance sheet as we go through the next couple of quarters? I know you've guided full year you took up the cash flow number, but just in terms of the out-performance this quarter and then sort of how to think about next and then fourth quarter.

Well, we tried to push second quarter and I think we succeeded. We tried to make it like a fourth quarter so that we had a much better performance in working capital, inventory and AR. And so I think you're going to see less of a skew where it all happens in the fourth quarter. Again, third quarter is seasonally weaker so you won't see nearly the performance [audio gap]. The fourth quarter will be well done, but it's kind of a smoothing effect which we're really trying for, for the long term. We'd like to actually do this trick more than in 2009.

Your next question comes from Ben Reitzes - Barclays Capital. Benjamin Reitzes – Barclays Capital: I've got two questions, one is on cash flow. You upped the forecast and it's $200 million which is a nice pop, but is anything happening to change your view of how you want to use the cash, in terms of when you think you can do share repurchases or acquisitions and how you're thinking about that into 2010 and 2011 even with the head start you got?

Well, I think, Ben, we stay where we are in this environment on what we're doing with cash. Right now we're paying down debt. We have debts [audio gap] third and fourth quarter going forward here that we going to pay down. We want to have a good cash balance [audio gap] and I think then we would evaluate if we change direction, if the economy got a lot better. If the economy stays where it is, I think [audio gap]. I think on the acquisition side, we have done small distribution ones. We're still looking at those, but they would be on the small side [audio gap] and we'll re-evaluate. Benjamin Reitzes – Barclays Capital: So in short, it sounds like next year you re-evaluate if things remain stable on that share repurchase question. And then with regard to post-sale, can you just talk some of the trends there in more detail? What's going on with supplies, is supplies inventory correction over, is it not over, and how long will it last, and maybe any other puts and takes of post-sale trends into the back half of the year?

What we've seen on supplies is no significant change from what we saw in the first quarter. Stabilization in North America and in Europe, continued weakness in DMO and in our XIP business, our XIP business, so not a significant change there at all. How long will it last is an interesting question. I don't really know. We're preparing for not a significant change for the remainder of this year for sure. We're preparing for supplies inventory to be under pressure and for the post-sales to be under pressure in total. I don't really know when it will change. Benjamin Reitzes – Barclays Capital: Is there a way to quantify what the hit was? You did a 40 plus gross margin. Is there like a supplies hit with, was there a channel inventory reduction that was a hit to the gross margin, though, in the quarter and that may be resolved even in a depressed market? Is there any way to talk about that?

There really wasn't, Ben, not that we could see a big difference there, not a big driver there. If you look at what Larry was speaking about in his discussion about how our post-sales slowed, we had an 8% decline in post-sales, but if you look at our core [new] business, the decline was about 4%. So the rest of the decline is from this inventory stocking and from our two tier business model BMO, XIP etc., the core business annuity faired significantly better than the rest of the annuity stream and the rest of the business. And if you look at that, we're counting on that level to go forward, the inventory to stay kind of where it is, they can't really destock much more than they have. We don't expect a big rebound there, and the post-sale stream on the core piece of the business we think will rebound when the economy rebounds.

Your next question comes from Chris Whitmore - Deutsche Bank.

Another question on gross margin, this time on product gross margin and the competitive environment, curious as to what you're seeing in terms of pricing and how are your Japanese competitors responding to changing in pricing?

We've seen pricing kind of be stable in the 5% to 10% range reduction, nothing unusual in price perspective, nothing unusual with a specific competitor. As you know, Ricoh is probably the most aggressive competitor in the market. They stay there, they remain there and their trends have not changed. The rest of the competitors have kept their position as well. We've even seen some price increases in some portions of the globe, not something that we've seen everywhere by the way. So gross margin driven by pricing, pricing not a big change across the board.

Just a follow-up on that, HP recently held a call which seemed to place a bull's eye on both your production business and your office business in terms of their expected growth going forward. What do are you seeing from HP, and maybe can you specifically address how you complete against Indigo in the high end production market.

What we're seeing from HP is their focus on our business, as you said, and they recently announced a managed print service offering that we've had in the market for quite a while. We are the leader there, as I pointed out when I was speaking earlier. So what we see in HP is trying to catch up with the position that Xerox has both in the production space, in the managed print services space, in the A3 MFP space across the board. We don't take them lightly, we are very confident based on our investments, our history, what we're doing in the marketplace today that we can effectively compete against HP.

Are they competing more with price or more with service and solutions?

What we're seeing in managed print services they're competing right now with words so that's right now with an advertisement so we have to see that in the marketplace. As I said on managed print services we are very, very confident there. In the high end space, which I didn't answer to that portion of the question before, we are very, very pleased with iGen position, the install base, the activity we got in quarter two, very strong. We do not see them positioning, competing with us on price. As you know, they are positioned in a different place in the marketplace our AMPBs and usage patterns for our iGen 4s are higher than their Indigo devices. But we have a breadth of portfolio that allows us to complete effectively and surround them, get right on top of them. So we're very - it's a tough market out there, we are very confident in the position that we have in both high end color and management services and A3 Office against HP and other competitors as well.

One last question from me is on the revenue guidance or expectations for revenue. Do you think the underlying rate of year-on-year revenue growth X currency will moderate, stay about the same, or get incrementally worse in Q3?

We expect it to stay about the same. We have not seen an indication for it to move in any direction, so we expect it to stay about the same.

. :

Larry, just to be clear on, and congratulations on a cash flow, Larry, on the intentions for the $1.5 you have indicated $1 billion of core debt. If I look at the debt ladder, will you take that $1 billion down by the end of the year? In other words, will you refi or do you think you'll just pay that off to lower your total debt outstanding at the end of the year.

.:

Ursula, I wanted to ask you about two things on the revenue side. One is the managed print services, and then second is the Solid Ink. And I wanted to get your prospective on how we might see - you mentioned that you're being successful in leader there, HP's jumped in the market. How might we see the benefits of that unfold in terms of the income statement? What's the magnitude of growth that you think you can get if you look at CY10, I assume that shows up on the services outsourcing and rentals line item, but perhaps you can clarify that and then I'll follow up on Solid Ink if I could. I'll stop there and then follow up on Solid Ink.

You'd see the benefits in wholesale lines and where the profit revenue flows through. What it allows us to do is – what it allows our customers to do most importantly than what it allows us to do, is to be significantly more efficient in their document infrastructure. What we end up doing is taking a large amount of spent and output spend and consolidate that. A consolidation doesn't happen at Xerox's expense generally it happens at single function printer expense. [Inaudible] so you'll see that by us selling more devices, also by actually more revenue streams, wholesale revenue streams from the services side of the business.

But can you give us some prospective, Ursula, on how big is the business now in terms of run rate, any kind of just color to help us think it might drive some opportunities as we look to next year?

About $3.5 billion on the MPS business the whole MPS businesses, large and small MPS business about $3.5 billion. It is growing it is a stronger growth engine or being impacted less than our equipment business. So it's an area of strength for us. By the way, these are global businesses as well. It's something that we practice around the globe. I think that's what you asked as well.

And then to follow up, Ursula, on the Solid Ink, it sounds like you're definitely suggesting you're gaining some traction there, any kind of color on how you think that impacts your growth trajectory as you look out over the next 12 to 18 months?

One of the major focuses areas for Xerox, because it's the big cry from our customers, to make color more accessible to them. They know it's important and they want to be able to use color but we can't give it to them in a cost effective manner. Solid Ink allows us to do that. We launched it first quarter of this year in two limited geographic. We're expanding the geographies because the call for it is more than we thought. People want it in all areas so we're expanding how quickly we open up the rest of the United States, go to Europe in the third quarter, GIMO in 2010. So A3 the ColorQube device we expect to be a good impetus for customers to take up color more and more. We would see the benefit of this product more in 2010, as we said when we launched in 2009 because this is all pipeline building and all teaching customers how to actually utilize this in filling the offers. And we'll see the benefit in 2010. We're very excited about it. It's doing what we expect it to do.

Your next question comes from Mark Moskowitz - JP Morgan

Firstly it is encouraging to see that after a really tough first quarter that you were able to establish and get back on track in terms of normal sequential growth. And Larry and Ursula I guess the question, as far as 3Q the weak seasonal revenue trend guidance, does that imply that you get back down to 3% to 5% sequential growth or is something a little lighter, a little worse And then I guess the follow up is what are the swing factors there, just given that the S&P can really be hemorrhaging here going forward if with look at the CIT fallouts or potential fallout, just the tighter credits at large, as well as the continuing problems with DMO. What type of cross turns do you see and what types of offsets are there?

Let me make sure I understood the revenue question. The third quarter sequentially, obviously, is a lower revenue quarter we get the currency compares a little better so that it helps it a little though, but it's definitely a lower quarter than second quarter, and we expect to see in a constant currency way the same kind of trends that we saw in the first, second quarter. That's where [inaudible] fourth quarter as well. On the financing, the majority of our business we finance ourselves, that was the financing section I went through there. And it's a great go-to-market strategy, works well for our customers in bundled contracts. We make significant [inaudible] and profit from it. And that gives us very little exposure to anybody else having difficulty in the business, whether it's the IT, anybody else because there's very little exposure to that area. As far as DMO is concerned, we really don't do financing there. Now, financing is affecting the business there because people are having difficulty getting financing, but that's a risky business that we have not gone into. We counted on other sources [audio gap]. Mark Moskowitz – JP Morgan: Larry, just to get back to the seasonality's, so just to put a bracket around it, historically you have been down 3% to 5% sequentially in 3Q. Are you saying the currency can maybe make it so it's only down 2% to 3%? Or you still expect to be in that down 3% to 5% bracket?

I think it's roughly the same. Mark Moskowitz – JP Morgan: Okay and then getting back to Shannon's question –

[Inaudible] before it happens is a gift [audio gap].

Sorry, Mark, continue, sorry. Mark Moskowitz – JP Morgan: I'm sorry we're having a tough feed here audio wise. I didn't mean to interrupt. I was just curious as far as Shannon's question earlier on the renewal activity. Those customers that are renewing, any change in terms of the overall structure. Are you having to throw in more goodies, as far as the post-sale kind of economics in years one, two, three and four out?

No change from the normal trends and so let me tell you what I mean by that. Generally when we renewed a customer, we renew at a better value proposition for the customer. They do business with us, we learn their processes, they either upgrade technology, gives them more functionality at a better price, or they up their service engagements and we give them, we provide them with more services and we negotiate a price. We are not seeing a change for the same service or same technology when a customer wants to move to that same technology if they did that significant pressure on price in that iteration. Generally, it's adding more value for a little bit more price or the same value for the same as to we did before. So net-net, the answer to your question is no, we're not seeing people coming to us and saying can you please renegotiate our leases or can you change the price of the contracts that we have. When a customer is in trouble, we clearly will work with them to restructure our business, but we're not seeing that in a wholesale way. Does that answer your question? Mark Moskowitz – JP Morgan: Yes you did I appreciate it. Just lastly Ursula or Larry, in terms of the call structure, clearly you've been really good with them as far as keeping a tight grip on cost and cost containment and takeouts, but I'm just kind of trying to get a sense in terms of when do we really expect to see SAG in particular decline at a greater rate then your revenues. Is that going to be a crossover point in 3Q or do we have to wait until fourth quarter in terms of year-over-year revenue declines are less than the SAG declines.

I think the revenue declines that you have now you can't see expense and cost going down [audio gap]. So I think our expenses have been coming down [audio gap] taking every action we know how to take [audio gap]. Fourth quarter, by the time we get to the fourth quarter if the spot rates stay the same, you get – part of the problem here is you have five or six points of currency affecting [audio gap]. So if in constant currency if you're down 12% or 13% [inaudible] going rate, then you'll see a year-to-year or better comparison there, but try to take the structure down at the same percent as actual [audio gap].

If I just may add, we want to make sure that we are positioned well when the economy rebounds. One of the reasons why it never approached the cost base to the tune of the revenue decline that we've seen last, fourth quarter, first quarter and second quarter because of that if we did that we would not be able to add the have value and be strong when the economy turns around.

And we don't expect those trends to continue 2010 don't know whether there's a recovery, but we don't expect that 18 [audio gap].

Your next question comes from Ananda Baruah - Brean Murray, Carret & Company. Ananda Baruah – Brean Murray, Carret & Company: I guess, Larry, I just wanted to go back to the cost savings and try to get a sense for what the driver or drivers were behind what you recognized I guess this quarter. I mean it certainly seems like you did a little more than anticipated given how you guys came out relative to the guidance. Did you pass more through to the bottom line? Did you do some things on a pull-forward basis from the second half of the year that you thought maybe was going to take a little bit longer to do? Was it some combination of both? I guess that's the first part and, then the second part sort of related to that is what should we expect in terms of, even if it's anecdotal, in terms of pass-through to the bottom line moving forward from the cost savings?

I think cost savings, what we did when we saw this significant downturn, we got our heads together as a management team and we focused on every possible area that we could and then we committed ourselves to get that done. Now, we did an excellent job and we delivered it in the second quarter. Sometimes you put together a whole cost and expense action plan and you get three-quarters of it, so these things actually, there's 55,000 people here all working on things, some of them happen, some of them don't. I think we had very good execution in the second quarter, we delivered a lot of it, and I think we see a lot of that continuing and I think we've reflected that in our guidance that it continues. Did we over-achieve on some of those things in the third quarter, you know, that's possible. Ananda Baruah – Brean Murray, Carret & Company: So you maintain the savings objective for '09 of $300 million, do you guys begin to rethink that at all?

I think right now we're executing on the restructuring savings and the other cost savings we committed to and we think they'll deliver the earnings expectation that we set out there. Ananda Baruah – Brean Murray, Carret & Company: I have a question on the equity income from Fuji Xerox because it seems like it's something else, it's another part of the business model that's been moving around a bit and I guess the question is, when you guys put together, originally, the '09 guidance, did you have the type of contributions that you're now seeing from Fuji Xerox baked into that guidance? I guess is it coming in line with your expectations or has it moved away from your expectations?

It did move away from our expectations, it's coming in significant lower than we thought. Business, flow-through business, economic impacts plus restructuring are both coming in worse than we thought. Ananda Baruah – Brean Murray, Carret & Company: You talked about and, Ursula, this is probably best taken by you perhaps, you talked about post-sale trends in the U.S. and in Europe being about as expected, like steady with Q1. Can you talk about overall European trends relative to overall U.S. trends, how things changed or didn't change as you moved through the quarter relative to your expectations?

They didn't change, unfortunately, they were about the same. Europe and North America are still seeing the impacts of a slow economy and we didn't see a change in Europe vis-à-vis the U.S. at all in quarter two to quarter one. Ananda Baruah – Brean Murray, Carret & Company: So things didn't get incrementally more challenging in Europe, as you went forward either?

No, not incrementally more challenging or better.

Your next question comes from Shannon Cross - Cross Research Shannon Cross – Cross Research: Ursula, can you talk a little bit about sort of global imagining and what you're seeing in small business and medium business in the U.S. and sort of thoughts on how that business may expand or potential opportunities for small acquisitions? And then, if you could talk a little bit about developing markets. I know they're sort of on different sides of the spectrum, but I'm just curious as to sort of, any signs of any stabilization, obviously down substantially this quarter, or sort of how you're thinking about developing markets as you go through the next few quarters, and maybe even 2010.

Global imagining first, global imagining is faring a little bit better than the main business that we have and the other channels that we have. There are acquiring, they acquired a company earlier this year. They are always looking out for them. As Larry said, all tuck in distribution acquisitions we'll take. They accrete revenue almost immediately, so they're good to do. Not a whole lot of them out there currently on the plate, but we're always looking. Small and medium business is suffering in the United States similar to other segments of the economy, struggling with growth, struggling with access to credit. We happen to have a good position here. We have a good channel. We have a good infrastructure for financing, so they are doing better than most. DMO is like the tail of two cities. DMO is Russia, Eurasia, these economies. I said in my talk earlier that I was in Russia earlier this year. It's a difficult environment, very difficult environment. Large companies, but small and medium business as well are suffering from an upheaval in the economic environment in these portions of the world and we're seeing it in our revenue stream, some significant declines. We are managing that business extremely tightly, not investing ahead of the curve, taking cost and expense out. We have a good flexible model in DMO. So we can actually move cost fairly aggressively and we have done that. We're not one to position ourselves so negatively that when the economy turns around that we can't take advantage. Our brand is strong there. Our management team, leadership team is strong there. So very difficult environment in the DMO territories, but we are managing it extremely well and positioning ourselves for growth when the economy turns around. And, by the way, the economy turning around, it won't be in DMO and it won't be this year. I'm pretty sure. Shannon Cross – Cross Research: Can you just talk a bit more about Fuji Xerox and what you think in terms of their opportunities for improving? You know, they continue to restructure. At what point do you think that will sort of settle down and I know Japan remains very weak. And we were over there not that long ago and it was not exactly happy. But I'm just kind of curious as to what you're thinking about Fuji Xerox over the next several quarters.

We want Fuji Xerox to manage their business very similarly to the way that we are managing our business, which is to focus on getting their costs in line to deal with the fact that the economies in their regions are weak. They are doing that. They're taking aggressive actions on restructuring, as you can see from the results. Japan is a major piece of their business, Fuji Xerox's business. Japan is particularly weak. So when you add those two things together we are pushing Fuji Xerox, focusing on them being extremely aggressive in managing cost and expense, but also focusing on investing for the future. We get strong offerings from them, so we want them to continue doing that cost and expense management as their economies continue to be weak. We have time for one more question.

Your last question comes from Richard Gardner with Citigroup.

Ursula, I just wanted to – it's more of a confirmation of something that you said earlier. I wanted to make sure that you had said I believe you said that channel inventories on supplies were stable, that you didn't see any additional big draw down during the quarter. And I wanted to gauge your level of confidence that there won't be additional channel inventory drawdown as we go into the back half of the year on supplies.

You are correct, Richard. I did say that channel inventory has reached a level that we have seen to be consistent, low level. It's hard for me to say what they will do going forward. We are planning for, and assuming that the channel inventories will stay as they are now. If we start to see a turn in either direction, up or down, we'll react accordingly. Up will make sure that we can supply the demand and down will continue to tighten our belt to make sure that we can deliver the earnings that we set. So not a big change from what I said earlier.

Thank you.

That closes our review. Thank you for the questions. That closes our review of quarter two earnings. You can count on this leadership team to continue our strong focus on driving shareholder value. My thanks, again, for joining us today.

This concludes today's presentation. You may now disconnect. Good day.