0001144204-07-005636.txt : 20070207 0001144204-07-005636.hdr.sgml : 20070207 20070207141425 ACCESSION NUMBER: 0001144204-07-005636 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20070201 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070207 DATE AS OF CHANGE: 20070207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RADISYS CORP CENTRAL INDEX KEY: 0000873044 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 930945232 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26844 FILM NUMBER: 07587420 BUSINESS ADDRESS: STREET 1: 5445 NE DAWSON CREEK DR CITY: HILLSBORO STATE: OR ZIP: 97124 BUSINESS PHONE: 5036461800 MAIL ADDRESS: STREET 1: 5445 NE DAWSON CREEK DRIVE CITY: HILLSBORO STATE: OR ZIP: 97124 8-K 1 v064670_8k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 1, 2007

RADISYS CORPORATION

(Exact name of registrant as specified in its charter)

Oregon	0-26844	93-0945232
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

5445 NE Dawson Creek Drive
Hillsboro, Oregon	97124
(Address of Principal Executive Offices)	(Zip Code)

Registrant's telephone number, including area code: (503) 615-1100

No Change

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

TABLE OF CONTENTS

Item 2.02. Results of Operations and Financial Condition.

Item 9.01. Financial Statements and Exhibits.

SIGNATURE

EXHIBIT INDEX

EXHIBIT 99.1

EXHIBIT 99.2

Item 2.02. Results of Operations and Financial Condition.

The information in this Item 2.02 and the Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or any proxy statement or report or other document we may file with the Securities and Exchange Commission (the “SEC”), regardless of any general incorporation language in any such filing, except as shall be expressly set forth by specific reference in such filing.

On February 1, 2007, RadiSys Corporation (the “Company”) issued a press release announcing its results for the fiscal quarter and full year ended December 31, 2006. A copy of this press release is attached hereto as Exhibit 99.1. Additionally, on February 1, 2007, the Company held a conference call discussing its results for the fiscal quarter and full year ended December 31, 2006. A copy of the text of this conference call is attached hereto as Exhibit 99.2.

In addition to disclosing financial results calculated in accordance with the accounting principles generally accepted in the United States (“GAAP”), the historical and forward-looking financial results in the Company's earnings release and the content of the conference call contain non-GAAP financial measures that exclude the effects of (a) Convedia acquisition-related expenses including an in-process research and development (“IPR&D”) charge, amortization of acquired intangible assets, amortization of deferred compensation, integration expenses and purchase accounting adjustments, (b) stock-based compensation expense recognized as a result of the Company's adoption of FAS 123R, (c) restructuring charges (reversals), (d) insurance gain, and (e) a gain related to supplier settlement. The Company believes that the presentation of results excluding these items will provide meaningful supplemental information to investors that are indicative of the Company's core operating results. A reconciliation of non-GAAP information to GAAP information is included in the press release attached hereto as Exhibit 99.1. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and reconciliations between GAAP and non-GAAP financial measures included herein should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures by other companies.

The press release and the content of the conference call contain forward-looking statements, including statements about the Company’s business strategy and the Company’s guidance for the first quarter of 2007, particularly with respect to anticipated revenues and loss/ earnings per share. Actual results could differ materially from the outlook, guidance and expectations in these forward-looking statements as a result of a number of risk factors, including, among others, (a) the amount of stock-based compensation expense, (b) the Company's inability to successfully integrate operations, technologies, products or personnel from the acquisition of Convedia Corporation, (c) the Company's inability to realize the benefits sought from the acquisition of Convedia Corporation, higher than anticipated cost of the acquisition and less than expected financial performance resulting therefrom, which may adversely affect the price of the Company’s stock, and (d) the factors listed in the Company’s reports filed with the SEC, including those listed under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, and in the the Company’s Quarterly Reports on Form 10-Q filed with the SEC each fiscal quarter of 2006, and other filings with the SEC, copies of which may be obtained by contacting the Company at 503-615-1100 or from the Company’s investor relations web site at http://investor.radisys.com/. Although forward-looking statements help provide additional information about the Company, investors should keep in mind that forward-looking statements are inherently less reliable than historical information. All information in this press release is as of February 1, 2007. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

The following exhibits are furnished with this report on Form 8-K:

Exhibit Number	Description

99.1	Press release, dated February 1, 2007

99.2	Text of conference call held February 1, 2007

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RADISYS CORPORATION


Date: February 7, 2007	By:	/s/ Brian Bronson
	Name:	Brian Bronson
	Title:	Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description

99.1	Press release, dated February 1, 2007

99.2	Text of conference call held February 1, 2007

EX-99.1 2 v064670_ex99-1.htm

Exhibit 99.1

	NEWS RELEASE

For more information, contact: Brian Bronson Chief Financial Officer 1-503-615-1281 brian.bronson@radisys.com

RADISYS ANNOUNCES FOURTH QUARTER

AND FULL YEAR 2006 RESULTS

HILLSBORO, OR — February 1, 2007— RadiSysÒ Corporation (Nasdaq: RSYS), a leading global provider of advanced embedded solutions, today announced revenues of $60.7 million for the quarter ended December 31, 2006 and a net loss of $5.5 million or $0.25 per share. Non-GAAP net loss for the fourth quarter was $40 thousand or $0.00 per share. The GAAP and non-GAAP fourth quarter results per share exceeded the Company’s previously issued fourth quarter guidance due to an improved gross margin rate, reduced operating expenses and a higher tax benefit relative to guidance. Non-GAAP results excluded a loss of approximately $0.25 per share, primarily attributable to the impact of acquisition-related expenses, stock-based compensation expense and restructuring charges.

The Company reported 2006 full year revenues of $292.5 million, an increase of 12% compared to 2005 revenues of $260.2 million. Net loss in 2006 was $13.0 million or $0.62 per share, compared to net income of $16.0 million or $0.68 per diluted share in 2005. Non-GAAP net income in 2006 was $12.0 million or $0.50 per diluted share, compared to non-GAAP net income of $14.7M or $0.62 per diluted share in 2005. The Company’s inventory increased in the fourth quarter by $13.9 million mainly related to transitioning out of the Company's contract manufacturing partner in North America. The Company expects the inventory increase to be temporary and the balance to decrease throughout the year.

Commenting on the financial results for the quarter, Scott Grout, President and CEO stated, “I am pleased that the fourth quarter results were better than expected. We ended the year with revenue growth of 12% over 2005 with most of the growth in our strategically targeted markets. Our wireless and medical equipment revenues both increased 21% over last year. From a global perspective, our Europe and Asia Pacific revenues increased 14% from 2005.” Scott Grout continued to say, “We made significant progress on our strategies in 2006. We were awarded record levels of future standard product business in both our communications and commercial markets in applications such as 3G wireless infrastructure, IP security, wireless billing, IPTV, XML routing servers, IP media processing, test and measurement and medical imaging. We also successfully completed the acquisition of ConvediaÒ Corporation, the leading provider of media processing platforms. We believe this acquisition will accelerate our strategy of offering higher-value, application-ready platforms.”

In the second half of 2006, the Company’s new Promentum™ SYS-6010, the industry's first ATCA 10Gigabit managed platform, began shipping to customers for their development programs. In the fourth quarter, the Company also introduced the ATCA-7200, a high performance Gigabit Ethernet Line card equipped with up to four Cavium processors and the new AMC-7211, which provides power efficient packet and security processing for customers. Both products have been well received in the market and evaluation units are expected to ship in the second quarter. Finally, the Company’s new Procelerant™ RMS420-5000XI, a 4U high performance embedded server with two dual-core processors, and the new Procelerant CE945GM dual-core COM-Express Module are both expected to begin shipping in the first quarter.

First Quarter 2007 Outlook

The following statements are based on current expectations as of the date of this press release. These statements are forward-looking, and actual results may differ materially. The Company assumes no obligation to update these statements.

Commenting on the outlook, Scott Grout stated, “We currently expect first quarter revenues to increase sequentially to between $62 and $68 million driven by projected increases in our wireless market. We expect first quarter results to be a loss in the range of $0.33 to $0.27 per share, and our non-GAAP results to be between a loss of $0.03 per share to income of $0.03 per diluted share. Our projected non-GAAP results exclude a loss of approximately $0.30 per share primarily attributable to the impact of acquisition-related expenses, stock-based compensation expense and restructuring charges. For the year, we currently expect revenue and earnings to grow modestly over 2006. We believe that the drivers for more meaningful growth will be determined by the timing of our customers’ next generation system deployments.”

In closing, Mr. Grout stated, “I’m pleased with the Company’s progress in 2006 on furthering our strategy to be the leading provider of embedded solutions across our targeted markets. We continue to make significant investments in our Promentum, Convedia and Procelerant product lines and these investments are resulting in a strong level of design awards for future business. We believe that the market acceptance and enthusiasm around our new products is strong and that our solutions will enable our customers to bring better products to market faster and at a lower total cost.”

Conference Call and Web-cast Information

RadiSys will host a conference call on Thursday, February 1, 2006 at 5:00 p.m. ET to discuss the fourth quarter and full year 2006 results and review the financial and business outlook for the first quarter of 2007.

To participate in the live conference call, dial (888) 333-0027 (U.S/Canada, toll-free) or (706) 634-4990 (international) and reference conference ID#6016804. The conference call will also be simultaneously webcast on the RadiSys investor relations website at http://investor.radisys.com/.

A replay of the conference call will be available two hours after the call is complete by phone at (800) 642-1687 (U.S./Canada, toll-free) and (706) 645-9291 (international) with conference ID#6016804 or over the internet at http://investor.radisys.com/. The replay will be available until Thursday, February 15, 2007.

Forward-Looking Statements

This press release contains forward-looking statements, including statements about the Company’s business strategy and the Company’s guidance for the first quarter of 2007, particularly with respect to anticipated revenues and loss/ earnings per share. Actual results could differ materially from the outlook, guidance and expectations in these forward-looking statements as a result of a number of risk factors, including, among others, (a) the amount of stock-based compensation expense, (b) the Company's inability to successfully integrate operations, technologies, products or personnel from the acquisition of Convedia Corporation, (c) the Company's inability to realize the benefits sought from the acquisition of Convedia Corporation, higher than anticipated cost of the acquisition and less than expected financial performance resulting therefrom, which may adversely affect the price of the Company’s stock, and (d) the factors listed in RadiSys’ reports filed with the Securities and Exchange Commission (SEC), including those listed under “Risk Factors” in RadiSys’ Annual Report on Form 10-K for the year ended December 31, 2005, and in the RadiSys Quarterly Reports on Form 10-Q filed with the SEC each fiscal quarter, and other filings with the SEC, copies of which may be obtained by contacting the Company at 503-615-1100 or from the Company’s investor relations web site at http://investor.radisys.com/. Although forward-looking statements help provide additional information about RadiSys, investors should keep in mind that forward-looking statements are inherently less reliable than historical information. All information in this press release is as of February 1, 2007. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

Use of Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with GAAP, the historical and forward-looking financial results in the Company’s earnings release contain non-GAAP financial measures that exclude the effects of (a) Convedia acquisition-related expenses including an in-process R&D charge, amortization of acquired intangible assets, amortization of deferred compensation, integration expenses and purchase accounting adjustments, (b) stock-based compensation expense recognized as a result of the Company’s adoption of FAS 123R, (c) restructuring charges (reversals), (d) insurance gain, and (e) a gain related to supplier settlement. The Company believes that the presentation of results excluding these items will provide meaningful supplemental information to investors that are indicative of the Company’s core operating results. A reconciliation of non-GAAP information to GAAP information is included in the tables below. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and reconciliations between GAAP and non-GAAP financial measures included in this earnings release should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

About RadiSys

RadiSys (Nasdaq: RSYS) is a leading provider of advanced embedded solutions for the communications networking and commercial systems markets. Through intimate customer collaboration and combining innovative technologies and industry leading architecture, RadiSys helps OEMs, systems integrators and solution providers bring better products to market faster and more economically. RadiSys products include embedded boards, application enabling platforms and turn-key systems, which are used in today's complex computing, processing and network intensive applications. For more information, visit http://www.radisys.com, write to info@radisys.com, or call 800-950-0044 or 503-615-1100. Editors seeking more information may contact Lyn Pangares at RadiSys Corporation at 503-615-1220 or lyn.pangares@radisys.com.

-end-

RadiSys® and Convedia® are registered trademarks of RadiSys Corporation

and Promentum™ and Procelerant™ are trademarks of RadiSys Corporation.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2006			2005			2006			2005
Revenues	$	60,701		$	61,905		$	292,481		$	260,234
Cost of sales		43,758			44,725			213,525			183,398
Gross margin		16,943			17,180			78,956			76,836
Research and development		11,270			7,571			41,492			29,784
Selling, general, and administrative		11,227			7,509			39,330			30,084
Intangible assets amortization		4,255			513			6,224			2,052
In-process research and development charge		—			—			14,000			—
Restructuring and other charges		313			127			139			1,128
Income (loss) from operations		(10,122	)		1,460			(22,229	)		13,788
Loss on repurchase of convertible subordinated notes		—			(46	)		—			(50	)
Interest expense		(431	)		(457	)		(1,732	)		(2,053	)
Interest income		1,847			2,017			9,348			6,337
Other income (expense), net		408			(270	)		851			(879	)
Income (loss) before income tax provision		(8,298	)		2,704			(13,762	)		17,143
Income tax provision (benefit)		(2,827	)		(2,181	)		(746	)		1,185
Net income (loss)	$	(5,471	)	$	4,885		$	(13,016	)	$	15,958
Net income (loss) per share:
Basic	$	(0.25	)	$	0.24		$	(0.62	)	$	0.79
Diluted (I)	$	(0.25	)	$	0.20		$	(0.62	)	$	0.68
Weighted average shares outstanding:
Basic		21,572			20,543			21,158			20,146
Diluted (I)		21,572			25,231			21,158			24,832

(I)

For the three months and year ended December 31, 2005, the diluted weighted average shares outstanding calculation includes shares underlying our 1.375% convertible senior notes; as a result, the diluted earnings per share calculation excludes the interest expense for our 1.375% convertible senior notes, net of tax benefit. The interest expense, net of tax benefit, excluded from the diluted net income per share calculation amounted to $242 thousand and $969 thousand for the three months and year ended December 31, 2005, respectively. For the three months and year ended December 31, 2006, interest on the convertible senior notes and related shares were excluded from the calculation as the effect would be anti-dilutive.

CONSOLIDATED BALANCE SHEETS

(In thousands)

	December 31, 2006		December 31, 2005
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	23,734	$	90,055
Short-term investments, net		102,250		135,800
Accounts receivable, net		42,549		39,055
Other receivables		3,782		3,886
Inventories, net		35,184		21,629
Other current assets		4,609		2,426
Assets held for sale		3,497		—
Deferred tax assets		5,779		7,399
Total current assets		221,384		300,250
Property and equipment, net		11,075		13,576
Goodwill		67,183		27,463
Intangible assets, net		42,935		2,159
Long-term investments, net		10,000		—
Long-term deferred tax assets		24,531		21,634
Other assets		4,546		3,629
Total assets	$	381,654	$	368,711

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	39,699	$	36,903
Accrued wages and bonuses		5,995		4,829
Accrued interest payable		222		224
Accrued restructuring		329		856
Convertible subordinated notes, net		2,410		—
Other accrued liabilities		11,154		8,279
Total current liabilities		59,809		51,091
Long-term liabilities:
Convertible senior notes, net		97,412		97,279
Convertible subordinated notes, net		—		2,498
Other long-term liabilities		978		—
Total long-term liabilities		98,390		99,777
Total liabilities		158,199		150,868
Shareholders’ equity :
Preferred stock — $.01 par value, 10,000 shares authorized; none issued or outstanding		—		—
Common stock — no par value, 100,000 shares authorized; 21,835 and 20,703 shares issued and outstanding at December 31, 2006 and December 31, 2005		212,887		193,839
Retained earnings		6,555		20,275
Accumulated other comprehensive income:
Cumulative translation adjustments		4,013		3,729
Total shareholders’ equity		223,455		217,843
Total liabilities and shareholders’ equity	$	381,654	$	368,711

Above is prepared in accordance with GAAP.

Additional supplemental information:

RECONCILIATION OF GAAP to NON-GAAP NET INCOME (LOSS)

(In thousands, unaudited)

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2006			2005			2006			2005
GAAP net income (loss)	$	(5,471	)	$	4,885		$	(13,016	)	$	15,958
Acquisition-related expenses:
(a) In-process research and development charge		—			—			14,000			—
(b) Amortization of acquired intangible assets		4,124			—			5,499			—
(c) Amortization of deferred compensation:
Cost of sales		26			—			34			—
Research and development		160			—			213			—
Selling, general and administrative		282			—			377			—
Total amort. of deferred compensation		468			—			624			—
(d) Integration expenses:
Research and development		—			—			9			—
Selling, general and administrative		277			—			423			—
Total integration expenses		277			—			432			—
(e) Purchase accounting adjustments:
Revenue		240			—			330			—
Cost of sales		503			—			1,378			—
Selling, general and administrative		97			—			130			—
Total purchase accounting adjustments		840			—			1,838			—
Total Convedia acquisition-related exp.		5,709			—			22,393			—
(f) Stock-based compensation:
Cost of sales		236			—			876			—
Research and development		542			—			1,745			—
Selling, general and administrative		1,346			—			3,968			—
Total stock-based compensation		2,124			—			6,589			—
(g) Restructuring and other charges		313			127			139			1,128
(h) Insurance gain		—			—			(362	)		—
(i) Gain related to supplier settlement		(400	)		—			(400	)		—
(j) Tax valuation allowance		—			(2,176	)		—			(2,176	)
(j) Income tax effect of reconciling items		(2,315	)		25			(3,365	)		(251	)
Non-GAAP net income (loss)	$	(40	)	$	2,861		$	11,978		$	14,659

The non-GAAP consolidated statements of operations below are adjusted for the items listed above.

NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2006			2005			2006			2005
Revenues (e)	$	60,941		$	61,905		$	292,811		$	260,234
Cost of sales (c) (e) (f)		42,993			44,725			211,237			183,398
Non-GAAP gross margin		17,948			17,180			81,574			76,836
Research and development (c) (d) (f)		10,568			7,571			39,525			29,784
Selling, general, and administrative (c) (d) (e) (f)		9,225			7,509			34,432			30,084
Intangible assets amortization (b)		131			513			725			2,052
Non-GAAP income (loss) from operations (a) (g)		(1,976	)		1,587			6,892			14,916
Loss on repurchase of convertible subordinated notes		—			(46	)		—			(50	)
Interest expense		(431	)		(457	)		(1,732	)		(2,053	)
Interest income		1,847			2,017			9,348			6,337
Other income (expense), net (h) (i)		8			(270	)		89			(879	)
Non-GAAP income (loss) before income tax provision		(552	)		2,831			14,597			18,271
Income tax provision (benefit) (j)		(512	)		(30	)		2,619			3,612
Non-GAAP net income (loss)	$	(40	)	$	2,861		$	11,978		$	14,659
Non-GAAP net income (loss) per share:
Basic	$	0.00		$	0.14		$	0.57		$	0.73
Diluted (I)	$	0.00		$	0.12		$	0.50		$	0.62
Weighted average shares outstanding used to compute non-GAAP net income per share:
Basic		21,572			20,543			21,158			20,146
Diluted		21,572			25,231			26,076			24,832

(I)

The diluted weighted average shares outstanding calculation includes shares underlying our 1.375% convertible senior notes; as a result, the diluted earnings per share calculation excludes the interest expense for our 1.375% convertible senior notes, net of tax benefit. The interest expense, net of tax benefit excluded from the diluted net income per share calculation amounted to $242 thousand for the three months ended December 31, 2005, and $974 thousand and $969 thousand for the year ended December 31, 2006 and 2005, respectively.

RECONCILIATION OF GAAP TO NON-GAAP LINE ITEMS AS A PERCENT OF REVENUE

AND EFFECTIVE TAX RATE FOR THE QUARTER ENDED DECEMBER 31, 2006

(unaudited)

	Gross Margin		Research and Development		Selling, General and Administrative		Income (loss) from Operations		Income (loss) before income tax provision		Effective Tax Rate
GAAP		27.9%		18.6%		18.5%		(16.7)%		(13.7)%		34.1%
Amortization of acquired intangible assets (b)		—		—		—		6.8		6.8		31.2
Amortization of deferred compensation (c)		—		(0.3.)		(0.5)		0.8		0.8		3.5
Integration expenses (d)		—		—		(0.5)		0.5		0.5		2.1
Purchase accounting adjustments (e)		1.2		—		(0.2)		1.4		1.4		6.4
Stock-based compensation (f)		0.4		(1.0)		(2.2)		3.5		3.5		16.1
Restructuring (g)		—		—		—		0.5		0.5		2.3
Gain related to supplier settlement (i)		—		—		—		—		(0.7)		(3.0)
Non-GAAP		29.5%		17.3%		15.1%		(3.2)%		(0.9)%		92.7%

The tables below are related to guidance estimates for the quarter ending March 31, 2007:

RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE

NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE

(unaudited, dollars in millions except per share amounts)

	Tax Effected Estimates for the Quarter Ended March 31, 2007 Low End High End						Per Share Estimates for the Quarter Ended March 31, 2007 Low End High End
GAAP net loss (assumes tax rate of 16%)		($7.2	)		($5.8	)		($0.33	)		($0.27	)
Amortization of acquired intangible assets		3.5			3.5			0.15			0.15
Stock-based compensation		1.9			1.9			0.09			0.09
Restructuring charges		0.4			0.4			0.02			0.02

Amortization of deferred compensation		0.4			0.4			0.02			0.02
Purchase accounting adjustments		0.2			0.2			0.01			0.01
Integration expenses		0.1			0.1			0.01			0.01
Total adjustments		6.5			6.5			0.30			0.30
Non-GAAP net income (loss) (assumes tax rate of 24%)		($0.7	)	$	0.7			($0.03	)	$	0.03

RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE GROSS MARGIN RATE

(unaudited)

	Estimates for the Quarter Ended March 31, 2007
		Low End	High End
GAAP gross margin % of revenue		27.4%	28.4%
Stock-based compensation		0.4	0.4
Purchase accounting adjustments		0.2	0.2
Non-GAAP gross margin % of revenue		28.0%	29.0%

RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE ESTIMATES

FOR THE QUARTER ENDED MARCH 31, 2007

(unaudited, dollars in millions)

	Research and Development Expense			Selling, General and Admin. Expense
GAAP	$	11.0		$	11.4
Stock-based compensation		(0.6	)		(1.4	)
Amortization of deferred compensation		(0.2	)		(0.3	)
Integration expenses		—			(0.2	)
Purchase accounting adjustments		—			(0.1	)
Non-GAAP	$	10.2		$	9.4

GRAPHIC 3 logo.jpg GRAPHIC begin 644 logo.jpg M_]C_X``02D9)1@`!`@$`2`!(``#_X1(&17AI9@``34T`*@````@`!P$2``,` M```!``$```$:``4````!````8@$;``4````!````:@$H``,````!``(```$Q M``(````;````<@$R``(````4````C8=I``0````!````I````-````!(```` M`0```$@````!061O8F4@4&AO=&]S:&]P($-3(%=I;F1O=W,`,C`P-SHP,CHP M-B`Q.#HR-SHP,@```````Z`!``,````!``$``*`"``0````!````KZ`#``0` M```!````-@`````````&`0,``P````$`!@```1H`!0````$```$>`1L`!0`` M``$```$F`2@``P````$``@```@$`!`````$```$N`@(`!`````$``!#0```` M`````$@````!````2`````'_V/_@`!!*1DE&``$"`0!(`$@``/_M``Q!9&]B M95]#30`!_^X`#D%D;V)E`&2``````?_;`(0`#`@("`D(#`D)#!$+"@L1%0\, M#`\5&!,3%1,3&!$,#`P,#`P1#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P, M#`$-"PL-#@T0#@X0%`X.#A04#@X.#A01#`P,#`P1$0P,#`P,#!$,#`P,#`P, M#`P,#`P,#`P,#`P,#`P,#`P,#`P,_\``$0@`,0"@`P$B``(1`0,1`?_=``0` M"O_$`3\```$%`0$!`0$!``````````,``0($!08'"`D*"P$``04!`0$!`0$` M`````````0`"`P0%!@<("0H+$``!!`$#`@0"!0<&"`4###,!``(1`P0A$C$% M05%A$R)Q@3(&%)&AL4(C)!52P6(S-'*"T4,')9)3\.'Q8W,U%J*R@R9$DU1D M1<*C=#87TE7B9?*SA,/3=>/S1B>4I(6TE<34Y/2EM<75Y?569G:&EJ:VQM;F M]C='5V=WAY>GM\?7Y_<1``("`0($!`,$!08'!P8%-0$``A$#(3$2!$%187$B M$P4R@9$4H;%"(\%2T?`S)&+A7U5F9VAI:FML;6YO8G-T=7 M9W>'EZ>WQ__:``P#`0`"$0,1`#\`[KZR6_6/$Q;^H=(NQC7C4NL?BY%3W%VS M=9867U6LVN]/Z#/27,?5GZU_77ZRV9#,,].I&,UCGNMKN,^INV!C66_\&[N!_Q._SO4_\`B\;_`-'JYAX3RV69C$R@8\)(_>8I M$^Y$6:-NSU7KOU[Z!0<[J&'@=0P:R/6?B&VM[&_OV-N]3V_RV,L_EK;^K7UG MZ?\`6/#=D8FZNVDAN1CV1OK<1+?H^U];_P#!6-^FK/7K\7'Z)GW99:W';CV> MINX(+2W9K_I)V-:O._\`%!3D?M3.M@^BS%KKM/;U"[?6W^OZ;;$!"&3E\F0Q M$)8R*E'2,[_1X4F1C,"[$GU-)5.J=5P.D85F=U"X48]7TGG4DGZ+&-;[GO=^ MXU9#_K7GMPSU']A9IZ>&>J;-U`M].)]3['Z_K?1_,^FJ\<Z=T2AEN:]Q M?<[T\?'J:7W6O/%6/2WW6/\`_E.7/\`^+SZR=5^L-74,GJ+V.].RMM-=;`QK`YF]P;]*QW_ M`%QZMYOUI?3B6.ZITO+Z;B7LKU+"?7$`[@Z.G];\SZ\4=8P*_ MJ_3ZF$\#U"&->UUF[])7F6/]V/CMIV;;&;/S_P!(NDZKU/%Z3T^_J.8XMQ\9 MNY\"2?S6,8/W['G8Q8W5?\8'U:Z8[TG7NR3E_53(^S@O-#Z[[&-U)KK=-O_;;?TO_`%M-$#(X83A[<2>'CKAE/5-T M)$'B\.S1Z1U#Z\?6>D]2Q+\;HO3GN<,9CJOM%KPT[2ZS>6,V[O9O;L_J*O\` M6/ZS_7?ZN83FYN/BW"TAF/U6C<&-=/&1BV;OTSF;O3][*4#_`!>_77IU&!3T M+J5C<9]1(Q,AQBNQKG&P5OL^C7G3]#][C_`$EL?5"Q(W3<8\/8U[=0X`CX M%27-9_UGH^J^)AXW5Z,FPBJNHYE%8=2^UK!ZC&GU`]CW;7/:RQBT^B=;KZUC MC+HQ;Z,9XW4VWM:W>)B6,;98_P#SVJO+%(1XZ]'270KQ(775TDEB]:^M%'1L MFFC)P\NW[4X5XSZ&->VRP_X%OZ5KFV?UVJ6?]9*<7+IZ=1C79G5+Z_5^PT[- MU;.]N5=8]F/CU[OT>[U??9_-H#%,T:^;4?3=/$'826$SZUULZCC=+ZA@96#F MYCMN.UX8^M\`O>YF31993^BC](S^=^A^C6ZA*$HU8WU'BH$%_]#T?KO_`")U M#_PK=_Y[>O+?\7V/]8+J.INZ#F5XN3750XUV5-L%IB[TJ_5L/ZO^?[MK_IKU M'KQ`Z'U$G0#%ND_];>N"_P`3O\[U/_B\;_T>KO+RX>6SF@:,/F'%'YNS#,7D MAY%R,#J5GUBZPSIGURSLME?J>G74PLHK9DM.WT[*K;^NT- M&MU;1_.LC_M10W_MVK_A*ZT7_%W]/YV32W^= M_P!)7^F_TR.?];A&3%I"/\YB'RPE^]PJAZ9<,MS\LOWG8^N7U3'UHPJ,;[4< M1V/9Z@=M]1I!::W;J]U?OVN_1OWI9/7>G8V,_H^&;>JYE%/I658P]1S8::]V M7D>S%QW>WW>M:RS_`(-8/^-3KV=A48O2L2UV,S-#WY5[-'^FPL9Z3'#\UWJ; M[?\`MO\`?74,QNC]&^KKZ\3TL?I]..YS;)`:06_SS[/\(ZW_`$G^$47#(8L1 MG&-#_LS7M'\MK;[/^O*/^)S3%ZI.D/H)_S'K-^K M&4/JO]?,S"Z@153D/LQS:_1HWO\`M.%>3_H[I]/_`*XK62-Y>:X?GX!P_P!V MAQL<34<=[6^G=4K9;TW+JL`;?XW/Z9T;_`*[_`-7C+I/KAUB[H5W2 MNJ&QXP6Y+L?-I;PZNYCMMKFQ[GXSJO5K3IP,\/+1&Y&2O\9`-3R'^ZY/UG_Q M8XF;ZF7T,MQ,ATN?B/'ZN\\^R/Z*_P#J?H?^"_/7-=$^MG7_`*H9G[,ZI5;9 MB4F+<*TS96W_`$N#=.U]?[E>_P"SV_X/TEZ[3=5?4R^A[;:K6A]=C""US2): MYKA])KEPO^-NO"'3,'(?M&8W(VUN_.-18]V0/^+:YM/_`%STT[ELYR$8,P]R M,M!?SP1DAP@SAZ2-?"3T?6\#$^M/U:LJQGML9EU"[#N[!X_2X]FON;[OYQ+D8GU1Z;3D`ML],OV MNY#;'ONK;_VV]JX[ZW56_53ZZXWUAQ6_JV83;8P:`NCT\ZG_`*_469#-W^'0 MQ1$O=Y:[U,L1_KX_^_BF1KAG_C>1>I_Y7^O4UMC+7U[_`.;_`'%OKR;ZV?5RSZE]0P^L M]$O>*WV[*JWG<]C_`*?V??\`2OQ_Z#V>HLGI_^+K!Z7<MSZPX#<_HV71Z(O MN%-CL9G?U@Q_H.K)C;9O^@Y9MG2,FJKH=>!2,4T6FW)<&AS6%V/:RQUM>]GJ M^I:_T_I_3_2)XYC+$<$3Z>W='!$FSN]#6TM8UKG%Y:`"\Q)(_..UZK<[W_25>SI'4ATCIE5^*^YV/F95F2T ML;<"U_VKTK7XKKJVV,M=96YM?J_HET_I./1#3566/.,6,J#160=FUM88'.;5 M_5]3V)N//DB28W&QKXJ,0=]7-ZK]3L+K'3*L+J63?D7XSG.HSCL;>W=RW]'6 MRI['-]KV^E[U7Z']0.C]+-3[;;^HNQW;L=F2_=34[4;Z,1L4-?K]+;[/S$'$ M^K?5,;ZNY0QK35GYF)0P8M?Z%K'5M_3>_?;^NY#7/INS-S/?Z=B+B=&^UNZE M3C8EG3.EY>&W']"P!A.1^D#LEE-;W[/2J=56^[_M0_\`TGI^HB.9SE]:R;\:_,QGU M'JKZW]487@B@8#Q9A-]K_=]L8S99Z?\`UQ6^G8%]/UER\B_$,6Y%CZ<@U-?[ M#56P%N9ZV^AFYKV^AZ"7WG,91G5;CEC;#G"YS/:]NZXV8SL]_JO^VLLK_HWZ/]66E]8L2Z^[I] MKZ'9G3Z+7NS<1@#B^6%N/:ZAVW[171=].G_KOI_HD3S68QD3*0O<;?\`15P1 M[!H=6_Q?X?6KVY'5>HYN18QI97#JJVM:3NAE==&W^TKF?]5&]2Z77TSJ.=?E MTUWUW;[0SU"VO_`.LI93_.-^G=_.K/\`V-U*[I&!BOH(K'4G7,Q[HM%&(?M! MQZLJOU&^LRIKJV>CZWZ/_K2Z08%1Z9^SGAHJ=2:'BMOIMVEOIN].O<[TV_VT MAS&4UK7!K';TG^K^ZK@C]KB5_4S]GR/J_P!4RNDU.,_9@6Y&."=7.KQ\QMOI MN=_)L4:/J'A6]09U/K>7?UK+JCT_M&UM+8.[V8M36U_2_,_FUG4=#ZW:,3H[_M6ZFWZ/\`W*6DS!O;]:\C+NQ'/KLMJ-&0:6V` M-;0VISF9)N:_%:VW?O9Z"'WK+XB]#+]/7^O\ZN"+TRY/Z[TT=7R^D?5LM%EF M7DC)O/=F-0'?:';A_-^OO]"M"^O'0/K7U+,Q3]NZSEM%=ETRVNINK,:IT,_._26^ MQGO_`,^R:$8XXC+[@,J-0'SQGT6FR>&M.[T8````@#0`+G[OJ?5^U,CK.#GY M6%U'*=-EE98ZLM#6UMILQK:WU65LV>W_``F__"+H4E#&JUNS M;I!_[\KB21R2.YZ5V%>2N$/_TO54E\JI)*?JI)?*J22GZJ27RJDDI^JDE\JI M)*?JI)?*J22GZJ27RJDDI^JDE\JI)*?JI)?*J22GZJ27RJDDI^JDE\JI)*?_ MV?_M%K10:&]T;W-H;W`@,RXP`#A"24T$)0``````$``````````````````` M```X0DE-`^T``````!``2`````$``0!(`````0`!.$))300F```````.```` M`````````#^````X0DE-!`T```````0```!X.$))3009```````$````'CA" M24T#\P``````"0```````````0`X0DE-!`H```````$``#A"24TG$``````` M"@`!``````````(X0DE-`_4``````$@`+V9F``$`;&9F``8```````$`+V9F M``$`H9F:``8```````$`,@````$`6@````8```````$`-0````$`+0````8` M``````$X0DE-`_@``````'```/____________________________\#Z``` M``#_____________________________`^@`````____________________ M_________P/H`````/____________________________\#Z```.$))300` M```````"``$X0DE-!`(```````0`````.$))300(```````0`````0```D`` M``)``````#A"24T$'@``````!``````X0DE-!!H``````ST````&```````` M```````V````KP````0`;`!O`&<`;P````$````````````````````````` M`0``````````````KP```#8``````````````````````0`````````````` M```````````0`````0```````&YU;&P````"````!F)O=6YD'1)D%L:6=N96YU;0````]%4VQI8V5(;W)Z06QI9VX````'9&5F M875L=`````EV97)T06QI9VYE;G5M````#T53;&EC959E7!E96YU;0```!%%4VQI8V5"1T-O;&]R5'EP M90````!.;VYE````"71O<$]U='-E=&QO;F<`````````"FQE9G1/=71S971L M;VYG``````````QB;W1T;VU/=71S971L;VYG``````````MR:6=H=$]U='-E M=&QO;F<``````#A"24T$*```````#`````$_\````````#A"24T$%``````` M!`````(X0DE-!`P`````$.P````!````H````#$```'@``!;X```$-``&``! M_]C_X``02D9)1@`!`@$`2`!(``#_[0`,061O8F5?0TT``?_N``Y!9&]B90!D M@`````'_VP"$``P("`@)"`P)"0P1"PH+$14/#`P/%1@3$Q43$Q@1#`P,#`P, M$0P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P!#0L+#0X-$`X.$!0.#@X4 M%`X.#@X4$0P,#`P,$1$,#`P,#`P1#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P, M#`P,#/_``!$(`#$`H`,!(@`"$0$#$0'_W0`$``K_Q`$_```!!0$!`0$!`0`` M```````#``$"!`4&!P@)"@L!``$%`0$!`0$!``````````$``@,$!08'"`D* M"Q```00!`P($`@4'!@@%`PPS`0`"$0,$(1(Q!4%181,B<8$R!A21H;%"(R05 M4L%B,S1R@M%#!R624_#A\6-S-1:BLH,F1)-49$7"HW0V%])5XF7RLX3#TW7C M\T8GE*2%M)7$U.3TI;7%U>7U5F9VAI:FML;6YO8W1U=G=X>7I[?'U^?W$0`" M`@$"!`0#!`4&!P<&!34!``(1`R$Q$@1!46%Q(A,%,H&1%*&Q0B/!4M'P,R1B MX7*"DD-3%6-S-/$E!A:BLH,')C7"TD235*,79$55-G1EXO*SA,/3=>/S1I2D MA;25Q-3D]*6UQ=7E]59F=H:6IK;&UN;V)S='5V=WAY>GM\?_V@`,`P$``A$# M$0`_`.Z^LEOUCQ,6_J'2+L8UXU+K'XN14]Q=LW66%E]5K-KO3^@STES'U9^M M?UU^LMF0S#/3J1C-8Y[K:[C/J;M@8UEO_!NW+M.N_P#(G4/_``K=_P">WK@? M\3O\[U/_`(O&_P#1ZN8>$\MEF8Q,H&/"2/WF*1/N1%FC;L]5Z[]>^@4'.ZAA MX'4,&LCUGXAMK>QO[]C;O4]O\MC+/Y:V_JU]9^G_`%CPW9&)NKMI(;D8]D;Z MW$2WZ/M?6_\`P5C?IJSUZ_%Q^B9]V66MQVX]GJ;N""TMV:_Z2=C6KSO_`!04 MY'[4SK8/HLQ:Z[3V]0NWUM_K^FVQ`0ADY?)D,1"6,BI1TC._T>%)D8S`NQ)] M3253JG5<#I&%9G=0N%&/5])YU))^BQC6^Y[W?N-60_ZUY[<,]1_86:>GAGJF MS=0+?3B?4^Q^OZWT?S/IJO''*0L#3;4\.O8<2\D!Z))4NC]8Z?UK`KZATZWU M:+)'$.:X?3KL8?K>;]:7TXECNJ=+R^FXE M[',;EVBNRMA>-M?VL8MM]N+O>YM>ZRO9O6%_B>!'3^H@Z$75`_\`;:L1QURV M4RB+!CPR^;>7J]2PGUQ`.X.CI_6_,^O%'6,"OZOT^IA/`]0AC7M=9N_25YEC M_=CX[:=FVQFS\_\`2+I.J]3Q>D]/OZCF.+W$GAXZX93U3="1!XO#LT>D=0^O'UGI/4L2_ M&Z+TY[G#&8ZK[1:\-.TNLWEC-N[V;V[/ZBK_`%C^L_UW^KF$YN;CXMPM(9C] M5HW!C73QD8MF[],YF[T_>RE`_P`7OUUZ=1@4]"ZE8W&?42,3(<8KL:YQL%;[ M/HUW-W>W?[+?^,7;];Z95U?I&7TVV-N54ZL.(D-<1^BL_P"M6[+%)D(Q9N&> M*/M\7IT_0_>X_P!);'U0L2-TW&/#V->W4.`(^!4ES6?]9Z/JOB8>-U>C)L(J MKJ.916'4OM:P>HQI]0/8]VUSVLL8M/HG6Z^M8XRZ,6^C&>-U-M[6MWB8EC&V M6/\`\]JKRQ2$>.O1TET*\2%UU=))8O6OK11T;)IHR,^AC7MLL/^ M!;^E:YMG]=JEG_62G%RZ>G48UV9U2^OU?L-.S=6SO;E76/9CX]>[]'N]7WV? MS:`Q3-&OFU'TW3Q!V$EA,^M=;.HXW2^H8&5@YN8[;CM>&/K?`+WN9DT664_H MH_2,_G?H?HUNH2A*-6-]1XJ!!?_0]'Z[_P`B=0_\*W?^>WKRW_%]C_6"ZCJ; MN@YE>+DUU4.-=E3;!:8N]*OU;#^K_G^[:_Z:]1Z\0.A]1)T`Q;I/_6WK@O\` M$[_.]3_XO&_]'J[R\N'ELYH&C#YAQ1^;LPS%Y(>1[<^RQW[]CEQO^,;ZF?;:G]F7#+<_++]YV/KE]4Q]:,*C&^U'$=CV>H';?4:06FMVZO=7[]K MOT;]Z63UWIV-C/Z/AFWJN913Z5E6,/4S1_IL+&>DQP_-=ZF^W_`+;_`'UU#,;H_1OJZ^O$ M]+'Z?3CNJ3I#Z"?\QZS?JQE#ZK_7S,PNH$54Y#[,7FN'Y^`UOIW5*V6]-RZK` M',?18US3P06.#@N'_P`3NO3NHD_Z6K_SV%V_5;J:.F9=USVUU,I>7/<8`&T\ ME,%N2['S:6\.KN8[;:Y ML>Y^,ZKU:TZ<#/#RT1N1DK_&0#4\A_NN3]9_\6.)F^IE]#+<3(=+GXCQ^KO/ M/LC^BO\`ZGZ'_@OSUS71/K9U_P"J&9^S.J56V8E)BW"M,V5M_P!+@W3M?7^Y M7O\`L]O^#])>NTW57U,OH>VVJUH?78P@MDC7PD]'UO M`Q/K3]6K*L9[;&9=0NP[NP>/TN/9K[F^[^<7-_XJNM/?BY/0,J69&$XV4UNY M%;G;+Z?_`$'R?_/JW_J'BY&)]4>FTY`+;/3+]KN0VQ[[JV_]MO:N.^MU5OU4 M^NN-]8<5OZMF$VV,&@+H]/.I_P"OU%F0S=_AT,41+W>6N]3+$?Z^/_OXID:X M9_XWD7J?^5_KU'.+]7:/DS[1C/J_F'_SE2ZSZDX5U'1!FY0C-ZM8_J&3_6O.^M@_ M=;71Z3=B/5=@=?/5.E=0QZKFX61Z-E+_`'2QU==U%\'^;<[U'[-O^B3(Y!"< M@8\>.,?:G_=OU2C_`-5218&M2)X@AQNH=#^ME>)D8&4#;@9#,KTXVVL_P#F_P!Q;Z\F^MGU/6FNINZAE8V)8S9;C8SJV-?J=V^QU5EWO^@]GJ+)Z?_BZP>EW'(Z9U M//Q;W-V%S7UN!;^Z^NRAS'K<^L.`W/Z-ET>B+[A38[&9W]8,?Z#JR8VV;_H. M6;9TC)JJZ'7@4C%-%IMR7!H.8RQ'!$^GM MW1P1)L[O0UM+6-:YQ>6@`O,22/SCM7*9?^+3H-_47]0HNRL&U[_58W%L:QM= MG>RB:WNJW.]_TE7LZ1U(=(Z95?BON=CYF59DM+&W`M?]J]*U^*ZZMMC+765N M;7ZOZ)=/Z3CT0TU5ECSC%C*@T5D'9M;6&!SFU?U?4]B;CSY(DF-QL:^*C$'? M5S>J_4["ZQTRK"ZEDWY%^,YSJ,X[&WMWQS?:]OI>]5^A_4#H_2S4 M^VV_J+L=V['9DOW4U.U&^C$;%#7Z_2V^S\Q!Q/JWU3&^KN4,:TU9^9B4,&+7 M^A:QU;?TWOWV_KN0USZ;LS7AMQ_0L`83D?I` M[)936]^STJG55ON_[4/_`-)Z?J(CF3 M40VP-.OI/W!S+:MWYEC/ZBR<7I?6LF_&OS,9]1ZJ^M_5&%X(H&`\683?:_W? M;&,V6>G_`-<5OIV!?3]9MOH9N:]OH>@E]YS M&49W+B&@DK@C54*1]-_Q>X.&T-RL[+ZBRL?H*,I^^BMT;66MQ/YI]E4_H_4] MB/T7Z@_5SHSZ\BJI]^75J,J][G.D?G;`6T_^!JMT+HW4,/J>'E6XY8VPYPN< MSVO;NN-F,[/?ZK_MK+*_Z-^C_5EI?6+$NONZ?:^AV9T^BU[LW$8`XOEA;CVN MH=M^T5T7?3I_Z[Z?Z)$\UF,9$RD+W&W_`$5<$>P:'5O\7^'UJ]N1U7J.;D6, M:65PZJMK6D[H9771M_M*YG_51O4NEU],ZCG7Y=-=]=V^T,]0MK_P#K*64_SC M?IW?SJS_`-C=2NZ1@8KZ"*QU)US,>Z+11B'[0<>K*K]1OK,J:ZMGH^M^C_ZT MND&!4>F?LYX:*G4FAXK;Z;=I;Z;O3KW.]-O]M(@A] MZR^(O0R_3U_K_.K@B],N3^N]-'5\OI'U;+199EY(R;SW9C4!WVAVX?S?K[_0 MK0OKQT#ZU]2S,7+Z%F.JJI9M=C-N=019N+OM`JY&(=V(RQK M*Z:G?Z5F-0UK7W_\+;ZBT7=-I=U%O4"YWJM;LVZ0?^_*XDDE=A7DKA# M_]+U5)?*J22GZJ27RJDDI^JDE\JI)*?JI)?*J22GZJ27RJDDI^JDE\JI)*?J MI)?*J22GZJ27RJDDI^JDE\JI)*?JI)?*J22G_]DX0DE-!"$``````%,````! M`0````\`00!D`&\`8@!E`"``4`!H`&\`=`!O`',`:`!O`'`````2`$$`9`!O M`&(`90`@`%``:`!O`'0`;P!S`&@`;P!P`"``0P!3`````0`X0DE-!`8````` M``<`"`````$!`/_A%_EH='1P.B\O;G,N861O8F4N8V]M+WAA<"\Q+C`O`#P_ M>'!A8VME="!B96=I;CTG[[N_)R!I9#TG5S5-,$UP0V5H:4AZDY48WIK M8SED)S\^"CQX.GAM<&UE=&$@>&UL;G,Z>#TG861O8F4Z;G,Z;65T82\G('@Z M>&UP=&L])UA-4"!T;V]L:VET(#,N,"TR."P@9G)A;65W;W)K(#$N-B<^"CQR M9&8Z4D1&('AM;&YS.G)D9CTG:'1T<#HO+W=W=RYW,RYO&UL;G,Z:5@])VAT='`Z+R]N&UL;G,Z<&AO=&]S:&]P/2=H='1P.B\O;G,N861O8F4N8V]M M+W!H;W1O3X*(#PO&%P.DUE=&%D871A1&%T93X*("`\>&%P.D-R96%T;W)4;V]L/D%D M;V)E(%!H;W1O&UL;G,Z>&%P34T])VAT='`Z+R]N&%P+S$N,"]M M;2\G/@H@(#QX87!-33I$;V-U;65N=$E$/F%D;V)E.F1O8VED.G!H;W1O&UL;G,Z9&,])VAT='`Z+R]P=7)L+F]R9R]D M8R]E;&5M96YT&UP;65T83X*("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@(`H@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@"B`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`*("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@(`H@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`*("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@(`H@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@"B`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`*("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@(`H@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`*("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`*("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@(`H@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M"B`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`*("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@(`H@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`* M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@(`H@ M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@ M("`@("`@("`@"CP_>'!A8VME="!E;F0])W0``9&5S8P`````````2D!\@'Z`@,"#`(4`AT")@(O`C@"00)+`E0"70)G`G$">@*$`HX" MF`*B`JP"M@+!`LL"U0+@`NL"]0,``PL#%@,A`RT#.`-#`T\#6@-F`W(#?@.* M`Y8#H@.N`[H#QP/3`^`#[`/Y!`8$$P0@!"T$.P1(!%4$8P1Q!'X$C`2:!*@$ MM@3$!-,$X03P!/X%#044%]@8& M!A8&)P8W!D@&609J!GL&C`:=!J\&P`;1!N,&]0<'!QD'*P<]!T\'80=T!X8' MF0>L![\'T@?E!_@("P@?"#((1@A:"&X(@@B6"*H(O@C2".<(^PD0"24).@E/ M"60)>0F/":0)N@G/">4)^PH1"B<*/0I4"FH*@0J8"JX*Q0K<"O,+"PLB"SD+ M40MI"X`+F`NP"\@+X0OY#!(,*@Q##%P,=0R.#*<,P`S9#/,-#0TF#4`-6@UT M#8X-J0W##=X-^`X3#BX.20YD#G\.FPZV#M(.[@\)#R4/00]>#WH/E@^S#\\/ M[!`)$"800Q!A$'X0FQ"Y$-<0]1$3$3$13Q%M$8P1JA')$>@2!Q(F$D429!*$ M$J,2PQ+C$P,3(Q-#$V,3@Q.D$\43Y10&%"<4211J%(L4K13.%/`5$A4T%585 M>!6;%;T5X!8#%B86219L%H\6LA;6%OH7'1=!%V47B1>N%](7]Q@;&$`891B* M&*\8U1CZ&2`911EK&9$9MQG=&@0:*AI1&G<:GAK%&NP;%!L[&V,;BANR&]H< M`APJ'%(<>QRC',P<]1T>'4<=:AZ4'KX>Z1\3'SX?:1^4 M'[\?ZB`5($$@;""8(,0@\"$<(4@A=2&A(B>K M)]PH#2@_*'$HHBC4*08I."EK*9TIT"H"*C4J:"J;*L\K`BLV*VDKG2O1+`4L M.2QN+*(LURT,+4$M=BVK+>$N%BY,+H(NMR[N+R0O6B^1+\<-]1B)&9T:K M1O!'-4=[1\!(!4A+2)%(UTD=26-)J4GP2C=*?4K$2PQ+4TN:2^),*DQR3+I- M`DU*39--W$XE3FY.MT\`3TE/DT_=4"=0<5"[40914%&;4>92,5)\4L=3$U-? M4ZI3]E1"5(]4VU4H5755PE8/5EQ6J5;W5T17DE?@6"]8?5C+61I9:5FX6@=: M5EJF6O5;15N56^5<-5R&7-9=)UUX7&EYL7KU?#U]A7[-@!6!78*I@_&%/ M8:)A]6))8IQB\&-#8Y=CZV1`9)1DZ64]99)EYV8]9I)FZ&<]9Y-GZ6@_:)9H M[&E#:9II\6I(:I]J]VM/:Z=K_VQ7;*]M"&U@;;EN$FYK;L1O'F]X;]%P*W"& M<.!Q.G&5&YX MS'DJ>8EYYWI&>J5[!'MC>\)\(7R!?.%]07VA?@%^8G["?R-_A'_E@$>`J($* M@6N!S8(P@I*"](-7@[J$'82`A..%1X6KA@Z&I+C MDTV3MI0@E(J4])5?EAMJ(FHI:C!J-VH^:D5J3'I3BEJ:8: MIHNF_:=NI^"H4JC$J3>IJ:H_R#W(O,DZR;G*.,JWRS;+MLPUS+7--:6YQ_GJ>@R MZ+SI1NG0ZEOJY>MPZ_OLANT1[9SN*.ZT[T#OS/!8\.7Q'EZA8:' MB(F*E)66EYB9FJ2EIJ>HJ:JTM;:WN+FZQ,7&Q\C)RM35UM?8V=KDY>;GZ.GJ M]/7V]_CY^A$``@$#`@0$`P4$!`0&!@5M`0(#$00A$@4Q!@`B$T%1!S)A%'$( M0H$CD152H6(6,PFQ),'10W+P%^&"-"624QAC1/&BLB8U&50V160G"G.#DT9T MPM+B\E5E=58WA(6CL\/3X_,I&I2DM,34Y/25I;7%U>7U*$=79CAVAI:FML;6 MYO9G=X>7I[?'U^?W2%AH>(B8J+C(V.CX.4E9:7F)F:FYR=GI^2HZ2EIJ>HJ: MJKK*VNKZ_]H`#`,!``(1`Q$`/P#<#^:V<^?^R=MYOL'XU)[G:!;O&B$ ME)`VHD9.D@@<.`-*GS''K6P^%'\^O^:3\^N\*'X_]#]!_#VFWQ6;7S^\IJO? MF7[-P&W\;M_;34$64J*RJHLEE:YZI:G)0Q1P10.[.Y)LJL1E1S]]W3VC]N.7 MWYEYBYBWL[>)4B`A6!W9Y*E0`544HI))8#'J>HJY=]R>9>9MRDVK;]MMA8M![4^2W\_KH#;>3W[N'X5?#/Y"[6P-+)DLYA.@^T.RE MWY#C:53+62XG;VZ**CJ\W/%"C-XJ2&JJ&'Z(7/'N(]GY5^[ES'=P[=;<][YM MEU(=*O>00>%J.!J>,D**^;%1ZD=#.\W/GW;X)+F39K2=5R5B9B:>?$JU?L1^ MEK_+1_GP?&O^81NZGZ6R^V<]\?OD7-25U1CNM]Y5]+D\+O-\1$\F9IMC;LA@ MQ_W^8QL<$DLV,K*2CKDBC9D64)(50^ZOW>.:O;6R;?8;J/_=>Z][]U[KWOW7NO>_=>ZJ6_FJ_,3YE?"CHKL3OSHKH_I/?O6_6V$P^1W M/N7L'L7R>^*WO/LO; M-%#M7;T.VL#A]LX!L-'B,-CZ&.:JGFCHON)/WYYI9Y"UV8\>U?O_`,CV:V.?%]55?8]' MV]OC(;KK,=N?86X]P4U)4#8E)@\%%3.NB6CG6.J:L:9HTTH/_9#V^]G>:.1> M:=UYYWM(M\A=Q1K@0FWB$8:.9$)'BEWU#(854)I!.2#G/F'FS:]^VNSV;;V> MQD4'4%U!GJ05/:QQVX&D@&M>1KZ MI?X7MO'8C%OE<_555:`5:CQ,$$K-(`;HEP#[Q<@LIK[<(MOVV-IKB681Q*!W M.S-I0`>K$C'SZDUYDAMVN+E@B*FIB>"@"I_9UK-]=?S2/YE/\TCMSL3`_P`K M'K;I?J+XU]6YH8/+_)+Y+X[-9VLW#63*\M`,9M+$3K%3UV6HD%7%CHXJJ:FI M)(WJZB%I$C]Y5[I[1^UOM'LVV7'N[NE]>\U7D>M;&Q95"#SU2,*D*>TN2H9J MA%8`GJ,;/FSF'FJ]N8^6;6.+;(6H99!\7V'(!_HA&IYL,="OVU\Q?YUG\O+: MF3[-^4WQV^//S;Z*P,,E=NOL/XOY+=/7._-D8R%&>?*[GV5GL?G(OX%3@7GK M:6FF@I4&N9HTNWLFV7DCV(]S+V':>4N9MRV#F&0TCAOUCFAE8\%CE1E[SY*S M`L<*">EM_O/.7+D$MYN-A#>6"Y)CJ&4>9:@X`_\`"R*9+#S/%_)T^VMALW#4[-PTLY8R92NQ^VLG3Q5% M:RQFKF1I`B!@H`/O?[?;?[:_=>Z M][]U[KWOW7NO>_=>Z__0WT]Y_P#'G[K_`/#:SO\`[JZKVJL/]SK/_FJG_'AT MSOGF_\`"9#_`+>H5?\`X@/O'_WJ-H>^F'WL/^G/0_\`2QM/ M^KLHNOF3?,98>MOY]>^9>@`N(R&&^=/ M6M;MN#:H6!*/>67W)L^?=E#CXJ$!(O/GLE71U$2`*#)(I`%Q[ZO\CUW7[N-@ MO,O?$^P3!S)FL:I((R2?Z"J03Z`]8F;]_B?N:YVK$GU(PH\]0)X>6K'7TV?? M*#K+/HEW?W\PCXC_`!IWOBNK.SNUX).W1<@_7 M_6N"W3N7'X]X_4M15T\$#*;AR/8ZY<]MN<^:K";=]IV=6P.W>SMN;7J=P&2")W5*$U$A1&.FRF MR[?_`&EY\Y6=59/27IJ&1`W!8'V,.5>0.<.=FN!RSL4US M%#_:2=J0Q_\`-2:0I$GV,X/13N>^;7M"UO[L(Q%0H!9R.%0B@L17%:<<=4T? MS3?YA_Q#^5O\L;YQ]==/=L1U79V*ZBH,[5]7;YVIO/JKLIL%'O7:XDSN/V1V M9M_:FXLSA8BPUU5%!401W&ME)'N*2*X@U M^%)V&6!Y$5O16()\AT"^8^9MEWGEC=X[&[_6"`Z'5XGH'7(615)'S`/3K_PE MW`_X;'O^3\A^Y"?\3]WA1<_[`>V_O;_]/9;_`*5MM_S_`-4]I?\`E3[;_3G_ M`(ZG5S'?WS,^*OQ;PS9SY`=]]9=7TOE2G@HMQ;HQZY_(54LJPQTF*VO125>X M\M5R2N%$=-2RO?\`'N"^7.1N;^;9Q;\N=JVP5OK^.,^0)[C3.%%6.!Y#HH7\Z:#>&YOY4?S'?K,5M9E*[IS^*LN.CJ! M75.SHLS@LGNTP1(GW`!V?%5O*I`/@#@_D>QM[$M8VGO#R/\`O;2L*WVGNI02 M:76.OE_::0/G3HEYV\>;E/=C:98Q`_[74I;_`(S7K7O_`.$P7\POH;JS:V_/ MA%VON/$=>;RWUV5/V5T]N//5%/C-O;]JL]@\-A\OLCK:.KACJ*6KI*J)H:FFJ8)5>*>GJ(79'1@592018^\"D=XW22- MRLBD$$&A!&00?(@\#U/[*KJRL`5(H0>!'5)WPTZPV-_*"VM\VJ3O#,[?Z=^) MVXOEME>ROC[N_(Y#^(X:@V/V/L_!9.OP&2I<''DZS:F/V?N?'UM!"U?'3QFF MBC(8J03///.[;A[TW?(3[!!)?06J\7D"QH/M9V`^P5J>C).CW;NWSMC8FSLM MO[=&1DQVU<'C/XQE,DF/R60DIL=:,^<8[&T=9DYR!*OHCA>3G]/!]Q]9;?=[ MA>P[=:1:KR1]*K515O34Q"C[20.A!<7,-K;R74S4@45)H3C[`"?Y=%@Z,_F& M?"WY,;]J.K^A/D)L;M3?]%0U^1R>V-IOEJW(X:CQC,E;+FP^+AAPK0RHT>BJ M>)VD4HH+`CV*]_\`;;GGE7;UW7F+ENXL]N9@JO)I"L6X:.ZK5&:K44R<=%=A MS%LNYSBVL+]99J$T`;@./$`#\^D9O;^9_P#"W9.^MU];KV?G-_[MV!5_8=BT M73'5O:O=E#UW6@%I*'?&21/B\..24+ M3^(QJP'[:\>A;Z!^;'Q/^4V3R&#^/7?/7O;6P>T,Q]]FMN8>IRD MV%BEW+B7BAK]N5ARM-)`U)6QP5:2(P:,6/LEYCY#YQY1ABN.9>7;FSMWE,:/ M(M%=@H8A&R'&D@ZD)4CSZ6V&][3NDC0[??)+*JZBHX@$TR#D9\C0_+HTGL)= M&O7_T=]/>?\`QY^Z_P#PVL[_`.ZNJ]J[#_K=N;TV_L/(G"U6?P$V0W)_'- MRQ38^2'%2TL,1I45IYWJ5$8N+>^J_P!X'9]BWWVWMK#F+F>/:-N-[;'QWB>8 M:@C@)H0@U8$G430!37K$_P!O+R^LN;[^;;]M-U-X3]H;3BBYK0_LIFO5MF]? M^%*'RU^16_J/XP='=/=+?#3?O8&[9.JE[6^0&^\WEFZOW555DV#E3-QMM3'8 M7;.8I,LGVJS5U'6Q4]4RZXC]1"]C]U?DWEG;'YOW_?+_`'S;;:'ZCZ>SA5?' MC`#=I\1F=2O=160E:T;H)*QHGSJ5`%/4J:'B,' MJR/^61_PGRV]\4^Y<=\M/E?VS%\B_DAC/]X=^;U^XK9I(*VJBHX*69S+'`90DB19[L?>4NN<=BDY,Y/V8[9RLR+& M^HCQI(EH!$%3LBBH`"JEBP&DM2H(KY3]MH=FOCO6[7?U.[$ZL?"&XUJ:%J'( MP,Y.H@$;(V33(28W(QXF:GI\K)0U:8RHJXVEI(,@U/(M%-51)ZY*>*I*LZCD MJ"![QLM[[53O[JNMW_696IVCG\7+V#LB'$U6U]P[+J&ZV2>RNT7TY\-$XIESV[]R[4P]3@-MT[$@P#/;MS5-1AA;I[+_)6'O7^:]\H):?L_Y(=Z=G;CV7L'<^X8$R M$?6O7VSI8H*_#=>4E8)XMJXN?-3M10+2B-HZ''QQW]>/O+[U!RH_+_L[R MD#:H;OFKZ4-.FY, M'*VY\-A\]@X@G_`.$PM%3Y#^5S4T%6C24E?W[W91U$:R20L]-45&)IYD66%XYH MF:-B`R,K+]00?9S][.1H_=WQ$/>NWVQ'VC41QQTA]IU#\FVZMP+&OYHG5'/_ M``IJ^,?17Q\^27Q'S/3?76$V'7=B;(W,V])L3]W)+N&LVIOO:<6&RF2GKZJL MJ:C*0TV:GB>H9S)-'I#EM"D9`?=0YKY@YEY5YU@WS1DDC=61T8@ M@@^^=ES))#N-Q-#(5E29BK`T((8D$$9!!R".!ZR&A57M(D=04,8!!X$$9!ZT MJ_YHG_":/>6VLKNSO/\`EY1#=FT:NJJ]PY?XP5U2*7=6UYY)GK:C_0WGJF5* M?.XF"8EZ;#5DD%;2@*E)//9(ESQ]HOO66-S!9\N^YI\*Z"A%OP*QR#@/J4&4 M8CC*H*MQ=5RQ@3G+VEF$\N\O=_3>TLBFVLC[&^V[?=O6ZM9%EL MI5(/Y\58>1]0>M'/X_C_`(8^_GPU_5VY4CH.@NSLM/U[BLYDHX_!2]&=YYC' MY;KW.Q9"5)3"-@[RQE)0U[H^KPT4Z.>??0'F0GW_`/N[1[M:DMS)9H)F1>)N MK5669"/^'1,S(#YNI'6/NW1CD'W)>*0`;?(HTJH9-H]>3MDJ8(`T%95S2K9C?WD[SCNFR
_?(O)-Y<"3D[8 MIK3;5#'LW+SG=]5 MN[58]W25]:L M:%R6-"">)440+Q`44%*=6Z]:?";&=._S(>ZOEOUWMO![=V7\B/CIMC:W9U/B M?L,=]]W/LO?LE91;F?#TXCDEJ]Q;,KM-;5JMI9Z-6DO)(S-"NZ\^2[W[7[%R M9N=S)+?[9NVTL!0? MJAP:^OOGG?\`"9#_`+>H5?\`X@/O+_WI]H>^F'WL/^G/ M0_\`2QM/^KWZ.-5SL<:F6KH8Q5B\L$IDB/[K M_O=^[Y;7VUYJO*64C4L9G.(W)_W&8G@CG^R)PKG1P9:#'W3Y$:\1N9=GC`O8 M\R`8K3\8_P"?J_Z;^*HM?\)X?YP:=][5P?P8^26[14]V;'P(CZ,WYG*T/4=O M]?X6E!&T\C7SO>L[!V3C(AXV9B^4Q48E%YJ>8N3?>:]D?ZM7EQ[@/>(EE9W.XWEIM]E"9+R>18T4<6=R%51\R2!U+\\\5M!-< M3OIAC4LQ]`!4G]G6L5\3OE3\DOY[W>?=";=[&WG\5_Y!KML]3Y0[7 M[W^0V2SPR-1A\3N[L^E8Y[8NVLEA*)JS(TF">EF2GGAI3.\CO.F5_.7)_*_W M>>7]A-UMD&[^Y^X(SA[A?$M+-4TZFC@/9*ZL=*-+J!8%](`"F+]GWC<.?;^_ M6*X:VY>@.DA#220DG!<9%0#JI0#@`:AA7?\`\*?/CET;\:.MOA/LGHGJ_:/6 MF`FR_=4^27;N*BBRV?K5PFUF.2W3N*H^XW#NK*R/(SO59&JJ:AW8L7))]R?] MTKFCF#FK=N?+_F'=IKJX$=L%UMVH-4G;&@HD:C%%15`].@C[M[98;9:;%#8V MB1IK8X&2=<>2Q[B?4DD]6J_SEJ#.5W\@+;3X:&IF@QW7'Q!R.X/MU=A%@(/[ MAQU,]3H^E+'6S4YOV:5_RTZ4?_``F"[.VYO'^6I3["QU7"^X^H.YNRMO;HQZLOGI%W M+DHMXX&KEC!UK#D<;F#H8@!C"UOH?:7[VFTW5C[JON$J'Z6]L8'C;R.A?"QW/*4,*L/$BD8'_;48?X2/M!Z-_P#SW/\`MTQ\TO\`Q&V._P#> MTVQ[!'W>O^GR=7`U%4Q9'&1[GHZ6DJD: M2G6&"I:8O:,J<1N4N1Y^>]QYOLK"ZT[I9V-Q=Q1:=1G,+@O$#4:6T%F4T:I4 M+3->I>W'>!L]MM$LD6JWED2-FK30"I.K@:TIGA05-<='X5@P#*0RL`RLI!#` MBX((X((]QSPP>A#U15_.\_E=='_,7XT=K]W4&UZ<9LC#U>X,AU_OB6G1%W'A,SC*"6"DDJ@\V.JFCDAD2,2))D)[!>[G,'( MW-FS;"]X\O*=]=)#+`QU+&96"":*OP,K$%@M`ZU!!-"([]P>3]OY@V:^NQ`H MW.&)G5Q@MH!.EO6H!`)R#YT)!I!_X24]I;TB[D^6'3,5=65'6N5ZWV5VN<6[ M2-08G>T&X)=L-DJ:,DQTM7G\'5*E1:QF^RC)N4]S_P#?/V>P.R\G;[X:C=%N M9;?5YM$4\32?4(XJ/34?7J/_`&1O+K7NNW2.3`@X>0*D#'^]$?8`/+JP3_A4 M/$_],?Q>VI\OMGXN6;??QCJY,;OB6@A9J^NZ3W=6PQY*L9XSY"-A;J:FR*6 M'[5-4UCW%A[C7[I'/PV+FZ\Y*OY0-MW9:Q5.!=1CM'_-V/4A]65!T)_=OEZ3 M<-IM]ZLUK>V;"OS0G_(WY49CT3Z@^=V;_FB_RZ_@'_+ZQVX?N^__`))]Z8'X M_P#RB%+4_P"Y;&]'?'08K>78F_LA%3DU,6.W[LZEQ%IV`6IFFJT!9HW'L:3^ MW<'M)[F^X_N/-:Z>6]KV][RPJ.QKJ]U1PPJ3@F*0R8_"`A-`0>B^RYG'-/+O M+VRP7`_>,\H20:N$&`=9ID'*L:T^%^)%#N`[GS?5O1/4\U=NZNPFR^IM@;; MQ."K*C)Q`8#";:@6AVUC:.JA2&9!CPDT-/I*%-+>H:;^\*+2#=^8=X$=E')/ MO-S*S@+\;.:NQ&>."W&OY]3#*]GMUE68A+*-`N>`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`)3X^_*O!?(O^ M6KUMOO=.Q-X[J._\)MKJX>X:D(\ODCAF9"EL;N8]AY0]O.VO]YCMN=A; M#[BQ]%E-I4..K\;6.M3%D0@:G9?((98O>3_NF?97WOY=V?F";W(M=LO+16*N MY4RJDE"\,MLS+(2&`TE/Q5IJ!ZC#E2+G+DG=+[;DV-[BTG8D8:E020=:JR^9 M]00173Y&[_G8?"+^:;\U^A.GOD?V!U=@JG>&RMT9O$P?#7X_R-V#E>IMA;PQ M4&O>V?WS6?P^N[2["JLKCH:;)4V*I*?&XNCT&G6H8SR*"O83G_VBY!YCWOEC M;MVD%E<0JQW.\_16XFC8_I)"*B"$*Q9&D8O(U=14!1T=<_\`+G-G,.WV6XR1 M()XWQ;Q@MI7#59A4LQ(H=*T%%X5:EQWP5Q7RP^9OPVR_0OS\^)&WOCQTA7_' MS;_0U-MG+[KK,KV[V35T.`BVWD]_U>VDH8:'J_"T^/HJ>?'4M3+59-8>8O;CG*7<]^7`%RZPAZDSL6)#LH6/P^W))H- M]AAW;>=B_=O,.V)!9&U6*E6+N0`NJA`T```BHKJR#0=:Z?5?QK_FU_R%_E+O MK0W/UGVGMN"K> M,U7V5312>25`9X'71D]O'-7LS]XKE';[;F+F*+9>:;<:E\5E1X)"`)`C2:8Y MX'(!TZ@PH#VL,Q?8[-S?[<;O.^UV;7>S2<5`9@14TII!*D<<@::D#6#U8?\` M-;NG^:C_`#+_`(#][[?P_P`"MY_$[K"/;&*KN9:S+YS)*LQI:4PP1`/+(L8,P5XP(K.S7PWU3SS%W$CT[8XD--3:F.`",=^N.:^:-@NH8-M^CMV5220[2 M.=0HJH45@`:,QTG`IT.O\B_XY?S.?A3T5-U=WST_TQLKH@[LW5VM)1Y#=^LJ:_'H].E7D8YXS(\95SH]D'W@^:/:?GWF+ M]\W^U269P$LEVE/[N^\< MB^V'+W,5KS3[A[0+_<)T;1%*TFA$1E&I@@&HES@5H`,YZ"WN#9;US3N&U3[9 ML=T(+<$$R1LI.HYH`#CA2I!.<<.K3/YF]3O_`.=O\GCN3:>,^,OR+Z_[CV%C M>C=POU1V!UI54.YLMN[%;JV_2Y+&;*&'K^]VR7LO->V7.QW#72?40S@QK&T;E6EU!#&3VT##XL`GH7\S"XYBY-N M[9-LN8;V+PCI="#J!`.BE=0&?M'$9Z;/B3\K/YI'P%ZAV=U-_,)^$W;WR(V/ MM/`8O'[1^0_Q5K<)W9O?%;=IZ2*+';8[9Z]HZ_'[FRV7P-,J4XRU$CM,D8$R M22!IW=YTY/\`:3W&WR^WCVTY[LMLOYI&:2SW`-:Q,Y-2]O,5**KFK>&W`GM( M':'-EW/F?8-NM[7F+:I;A40`21=[4]&"UJ1ZG2?+N^+I*?.#^9C\G/F?TWO; MXI_R[/@5\QJ_>7=6WLCU_N[N'N[I_*](;,Z_V?N>EDQ.Z#CZK>D])%4YNOQ- M5+3+4S2PPT,CG?R5/Y47"Y/M3,8'7+MS:^,P=/.FW.N-JU<\ M453D,9M]JZ>6IK76/[VMF=E18TCN!_?GWB;W7Y@MAM\+P\L6(9;=7P[LQ&N: M0"H5GTJ%6ITJ`":D]&G(?)J76V]L7!FMG[^VQG-G[GQ-2B/#D<%N+&U.)RE(X=74>:CJG`-CI-C]1 M[A3;=QN]HW&QW6PE,=];3)+&PXJZ,&4_D0.AK=6T5Y;3VLZZH9$*L/4$4/6H M5_PG$^`&&ZW^6_SB[X>NI=W[3^.W8>]OB7TIO!8R\.?KZ+<$]1O?<=!.>&FQ MFV*3%XV1QJ#25M2H/I/O-7[T'N5/NW)?M_RZ(S#>;E:Q;A=1^:`H!$A^32&1 MP/1%/GU#'MERNECO6_[F7#PQ2M'&1YDDZSZ?"`<>4E/+K8L_FD]>;Y[9_EY_ M+CK7K/;6;WCV%O7IS<.W]F;:VY&LN=RVXZ^2DCQ5/BP\D,:525>F179U6/1K M)`4GWC%[1[GM^S>Y?)FZ[K=)!ML%\CRR/\*H*ZBW'%,4\^'4F\UV\]WR[NUM M:PF2X>*BJ,U-10=$[^*_\QGNWJ[IC8_6W\P3X<_+'K/OW9&VL;MK.[HZZZ7W M'WEUIVG)@Z&*AIMV[;W/U*NZXL9D\[%`KU=!6I!X*LOHD>,J0-^;O;#8=WWW M<-T]MN=]FNN7+B5I$CGNDM)[?6:F-X[CPRRH3176M5I4`\2;;>9;NQL;:VY@ MVF[2^1=)9(GD5Z8#50-0D<14BOGY`J_0_P`(^W?F=_-_K?YJG:_2^Z/C7T5U M;MW";?Z*V#V71T6$[G[=W1@-LY3;&/[*WGLZAJJZ38^&IJ7-U$L%/7R_Q"58 MJ6-HU"R:1?S#S_LW(WLHGM!L^^P[IO\`>2L]W-`2UM;H\BR&"*0@>*Q*@%D& M@5@=Z*%#%033/<:^B@5R1=WUCO\`[YS? M;7:VW=Z;)&.V/@ON7V1E#BY<=!6&%TCI*=YMW[\V'U]FMU]<[`H>R]Q89$K&VKD-WTFQX)\33AY\M6+GJW& M9:GCGH:.-G2$P_O-Z=2_7VCOY[JWM9)K.U$TR_A+!,>9U$'@/EGJR!68!FH/ MV]$:P_\`,+W!#\/\?\QM_P#1D>RMC;FS_5<&SL2O9V&S5;7;.[*W9@]J3;MW M#6I@J"CVU_=J3+O4STK^,`\7PE>ISY>G3GG/YD?7J;4^:V]]B;>H^S-J?#W`;+S0W%M'>^ M#R6"[/FW9MHY^JH,)EJ.&KH<2V`F4TU1)(\ZEP6%@+>[R\W6@AYAN+:(306" M(=2.I636NH@$5`T\#QZ\+=JP@FA?^71@?BI\A\C\C]GYW=E;ANM\/%C,S28R MDCZV[GVYW10R)4X:@RTB9G*[;QN-I\!F:4UP1Z&4/*%L][,![--DW5]VMY9W MCA72U/TYEF'`')4`*17AU26/PR!4_F*=%@[[_F5XWH7Y![EZ:RO4[[@P6SLG MT=B,YN#'=B[;H]\9.J[VK7QV#DV%U16TBY_?D6W*I-646CG$E/3GR6(X]D^Y M\W)MNZS;>]CJCC:$,PD4.3,:+HC(U/I/Q4.!GJZ6^M`P;.?+&/4^72R[A^L^`Z[P%?05TF]=PX M#9(&2K(YI\=`"RTR2-,PLHO^9)K:XW-+/;3/;V*AIVUA2*KKTQJ0=;!.XU*C MRK7K20@A"ST+X/BM0?)?J;*4&6HL?4 M=G565W7MW:>*ZQQ^-JJ9Y<9N7(56\L1(DLC2)HJR"G[9)]?)5E41@'@Q+I^WY=>6`M^*AU4/R^?33@/YBV'W1L/LWL+"=59RIPO5/ MQ&VO\FMS(VX< M7D=DQC@L%N&[A74P8^%P^(:#4_RZ\8"&52W%J?[/43;'\PJJRGQ=[T^3F4Z\ MV!6XOIW9^-W?3[3ZS[[VGV?D\M'D,-#F3A-S5N&PM)3[#SM+'4HCT]6DS@AS M]%/NL/-1?9=RWE[6(I;QAM,ZZQO6F_\`#5>Z\3NN+>.^J^FR>`@PV`S>T9X!6(/% M41R12+I#:05W'-T4>TV&Y16??-<^`5=UC$;@L&UN:K12I%>!P>KBW/B.A;`% M:@5J.CX=1;[R7975NTM_5F/VO19+<^%.5^PVAOC&=A[45WEJ$IUPV^\+2TV+ MW#03QQJPJ8(@EV(`.GD2V-RUY90711`SK6BN)%_)P*,/F!TRZZ6*^GY=5[;8 M_FF[-R^XOCU@,YU9N';B=O4/;/\`I"RLN?QM;0='Y[K'.[QVU2;?W08Z.%\I M4[QR^P\DE$T7B"K$"P-^`O#SG;R2[7%)9.@G$OB$L"(3&SJ%;&2Y1J4IPZ?- MN0'(;A2GSK_FKUPW_P#S+:_9>T?BOG9>GMN8/+_*#K;<_9M!2=J=V[7ZKVQL MK$8&CPN4H,;F]YYW"U..J6GA2-#<.O.FYI=6WU&0:\*:8%?Y=&B^2?S%ZW^)'Q/SWRT[L@K*?9^V M-K;5S>4PVQIJ?>5;DE>)O.Q1/T$M3`ST1;YN]GL&W76Z M7S'Z:*E:#))(4#\R1QP.)ZHA[0_X4M?'/MKX\;IVI\4MC=SU?S.[/B'5W2/4 M6XMDK'*O8F]W_N_@-P3;CP^1R>#J\5@YZT59CCE^YFDB6/QJI:1P\_/4ZY6J_N-Q9":**0LQ-/#'S8#W`ONASHW/_.^]\R(A M2QD<);IP\.WB&B%*8IV`$BGQ$]#[EW:_W/M-K9M3QZ:GH2>]LD`DDT7"BI.` M.CT>X_Z.^O>_=>Z][]U[KWOW7NO_U=]C=D6-GVKN:',U,M%B)MOYF+*UD"/) M/28V3'5*5U3#'%%/))+!2EF551V)%@I/'MN8*8I0YHFDU^RF>MCB*<>JSJS9 MGP^/\N3H[:M7V[O%?BWC:KH5MB=G3;?W`=S;A;&=H;:K.OH\UA)-EG,TE/N/ M=<-+1UIJ<33)#3RN\QAC#2*#9+?8/ZI[=`]_)^Y08=$FEM34D4I4:*@,U`:J M*`YIQZ4`R^.Y"CQK\OA_P#*:M*`9B2.?TS)$UT]TOK?EUX^;_%O MW5)$B^ITJ2(@$["E$.HD9.G5GC3K:-+6WTID$T^?V]'0^,VRX=E[2R-+1=P[ MG[AQE;/B*C&9/UL)\5J3YK=XYQMY83* M_)/,;;Z4@SNS-WXZB@J-IT.-P>XX]F5O6N2S>#HWKZW<..FJ),BN)KJQX6BB M$ZPDQAD4$>R+S%N4GU"MO#)#5'`JH"MH,98"NH5U:":4%:8ZL3)X2"G9GA_E MZ+EW]UK\:-V;\^96:IOD5W)U;BZ+8^SHOGKLWJ_9FXMP;?S>UZ?9KU.(GFRT M'7.YJO$;LKNM+P9-MKU,V2&(TFHBB;3)[*MTM-HGN=_D&ZW$*")/K4C1F4KH MQ4^&Q#&/#>&2VGB!QZ<1I`L(*`Y[:_;]OKZ]*?Y#[;^#&:W9_+UK]\]A979X MVYN3;F3^,.$V?BMU9#;?8.#;%[8IMJ[=WK4XG:^L8(-0@*`E%&HH5#`YH3UMC-XD!*#4*4X9^W/'UZ6F5ZMZ0Q/PE[TP?9OR M:[&W7\<]P]2;?I\UO.?8N&QF:V#U]#@:)**NPN/V1UK0YS,5U7B&IGE6IH*Z ML73ZD4EA[?DLMMCY!=3Z`&2/2*$!(PQ)%*U4GY=:#/XR%8QXE M>%>/[3T,7QGV]\9:#OWO;-=![\ES>XZ_K_HG&]E[/V[BIJ;KC"+B\'GO[C[A MQV1H-O8_:U3O/(,8[/%LZ[GNC+"-ZH#% M4RH*W#5>8W'-F9\A)DZ3$4L53"BI)&IA5RV*#EK]V["D=Z_TB7U8RP:LD MX,FL2ZDJ"6UEM045'$8Z<8S:Y=2]VG/R&.'5L>'_`(/_``NA_N__``S^"^!? MX;_!_M?X7]MSH^Q^R_R3P?6WC]/L;1^'H7PJ>'3%*4_*F.DQK7/'JAOM'KO^ M657;5^>M+N3OSLO"4N[>_-GY/N7)8/:_8=3FNK.P*+<.>$6W.FH<=UK7UN.3FP468HHZB>L\\\>DZ8TO+3E!H.9Q+N[)IW-[>[$$G@Z%#!HZ)J^)&44&FE:'TKGII&D"RU2HKG[<]&,^1M#\ M;<=\2-\8[YDYK:VX?CC1=>4-)VUN#M2E@H<+F<%`E!%'E:O\`MPWJ M\>N^0GNO-]YF7EEO]<2UN8N5P5\3PC;&,Y[3/]*[FE:4\2B:J8K3H!\K)[<) MN'_(>EB;<:FE?$J#FNGQ`!6E>&:5ZV3_`'BSU)O7O?NO=>]^Z]U[W[KW7O?N $O=?_V3\_ ` end EX-99.2 4 v064670_ex99-2.htm
Exhibit 99.2

RADISYS CORPORATION

Fourth Quarter and Full Year 2006 Conference Call

February 1, 2007

4:00 pm CT

Operator:

Good afternoon. My name is Melissa and I will be your conference operator today. At this time I would like to welcome everyone to the RadiSys Quarter 4 Earnings Release conference call. All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks there will be a question and answer session. If you would like to ask a question during this time, simply press “*” then the number 1 on your telephone keypad. If you would like to withdraw your question, press “#”. Thank you. I will now turn the conference over to Scott Grout, CEO and President of RadiSys. Please go ahead.

Scott Grout:

Good afternoon and thank you for participating in our fourth quarter conference call. In this call we will review our financial and strategic results for the fourth quarter and full year 2006, as well as our outlook for the first quarter of 2007 and then, as always, open the call for questions. Participating on the call today are Brian Bronson, our Chief Financial Officer and myself, Scott Grout, President and CEO. Before we get started I’d like to turn the call over to Brian for a caution about forward-looking statements.

Brian Bronson:

Thanks, Scott. Any statements in this call regarding future expectations for the business of RadiSys constitute forward-looking statements that involve a number of risks and uncertainties. We caution you not to place undue reliance on these statements. Factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in our earnings release today, which may be found on our web site at www. radisys.com, and in our SEC filings, including our 2005 Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. All information provided in this call is as of February 1, 2007. RadiSys undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

In addition, we will be referring to certain non-GAAP financial measures during this call that exclude the effects of stock-based compensation and acquisition related costs such as intangible amortization, purchase price accounting adjustments, amortization of deferred compensation, and integration expenses in addition to restructuring charges and a supplier settlement gain. For a reconciliation of our non-GAAP financial measures, please refer to our earnings release issued today, which is available in the investor relations section of our website at www.radisys.com.

Now, I’ll turn the call back over to Scott.

Scott Grout:

Thank you, Brian. Our results for the fourth quarter came in better than expected. Our revenue for the fourth quarter was $60.7 million and our net loss was $5.5 million or $0.25 per share. We were approximately breakeven on a non-GAAP basis versus our non-GAAP guidance of a loss of $0.04 to $0.09 per share. The GAAP and non-GAAP fourth quarter results per share exceeded our previously issued fourth quarter guidance due to improved gross margins, a reduction in operating expenses and a higher tax benefit relative to guidance. We ended 2006 with revenue growth of 12% over 2005 with a majority of the growth in our strategically targeted markets. Our wireless and medical revenues both grew 21% over 2005 and from a global perspective, our revenues in Europe and Asia Pacific increased 14% over 2005.

We made significant progress on our strategies in 2006. We were awarded record levels of new standard product business in both our communications and commercial markets last year. While these awards are non-committal and can take one to two years to begin to ramp, we believe they will be key drivers to our future growth. In the year, we were awarded new business in a diverse set of applications including 3G wireless infrastructure, IP security, wireless billing, IPTV, XML routing servers, IP media processing, test and measurement and medical imaging. I continue to be very pleased with our awards and the overall market acceptance of our products.

In 2006, we also completed the successful acquisition of Convedia Corporation, the leading provider of IP media processing platforms. We believe that this acquisition accelerates our strategy to provide higher-value, application-ready platforms. We also increased revenues in our strategic markets such as medical equipment and increased our international revenues. This past year, we did a lot of work in operations to fully implement RoHS, expand our Asian operations and resolve issues with our North American EMS.

In the second half of 2006 our new Promentum SYS-6010, the industry's first 10 gigabit ATCA managed platform began shipping to customers for their development programs. We have delivered dozens of 6010 systems to a number of different customers to enable them to begin development of their applications. In addition, in the fourth quarter we announced our newest ATCA asset, the ATCA-7200. The 7200 is a very high performance modular gigabit line card equipped with up to four Cavium OCTEON Plus processor AMCs. We also announced the new AMC-7211 that provides power efficient packet and security processing for customers. Both products have been well received in the market and we expect to begin delivery of evaluation units in the second quarter. For our Commercial markets, we also announced two new products as well. First is our new Procelerant RMS420, a 4U high performance embedded server with two dual-core processors. The second is our new Procelerant CE945GM dual-core COM-Express Module. Both products are expected to ship in the first quarter.

I also want to give you an update on our Convedia integration efforts. I am very pleased with our progress integrating Convedia into our operations and I believe we are well on track to create a strong and unified business. We view this acquisition as a meaningful strategic accelerator for RadiSys that is intended to expand our platform solutions business as well as broaden our base of new customer, new products and new technologies. As stated previously, we expect media server revenue growth will be driven by network operators moving from current generation TDM networks to next generation IP-enabled IMS networks. We continue to believe that this acquisition will become accretive on a non-GAAP basis in the second half of 2007.

Shifting gears to our fourth quarter results, our revenues by market were derived as follows:

·

70% or $42.3 million of fourth quarter revenues were from our Communications Networking market, a growth of 12% over 2005. This market includes wireless infrastructure, IP networking and messaging and other networking infrastructure. Wireless networks represented 20% of total revenues for the quarter. We expect our wireless market revenues to increase in the first quarter as one of our larger customers returns to more traditional volumes.

Revenues from IP networking and messaging were 36% of total revenue for the quarter. We currently expect our IP networking and messaging revenues to decrease in the first quarter as our business with Nortel decreases from 17% of total revenues in the fourth quarter to more normal levels in the first quarter.

·

30% or $18.4 million, of fourth quarter revenues were from our Commercial Systems market which grew 13% over 2005. The Commercial market includes medical imaging and diagnostic systems, test and measurement equipment, transaction terminals, and semiconductor and manufacturing capital equipment. Medical systems represented a record 15% of total revenues for the quarter and for the year grew 21% over 2005. This growth is very much in line with our strategic focus in this market.

Our top five customers for the quarter were Avaya, Comverse, Nokia, Nortel and Philips Medical. Collectively, our top five customers represented 57% of our revenue for the quarter. Nokia represented 18% and Nortel represented 17% of fourth quarter revenues. From a geographic perspective, 46% of our revenue came from North America, 45% from Europe, and 9% from Asia Pacific. Asia Pacific revenues as a percent of total revenue decreased sequentially mainly due to the decrease in wireless revenues in the fourth quarter.

With that, I’d now like to turn the call back over to Brian, who will give you some additional information about our fourth quarter financial results.

Brian Bronson:

Thanks, Scott. As Scott mentioned previously, our revenue for the fourth quarter totaled $60.7 million. Our net loss for the quarter was $5.5 million, or $0.25 per share. Non-GAAP net loss was $40 thousand or approximately break-even on a per share basis. As detailed in the GAAP to non-GAAP reconciliation in our press release, fourth quarter non-GAAP net income excludes the effect of acquisition-related expenses, stock-based compensation expense, restructuring charges and a supplier settlement gain.

Our gross margin percentage for the fourth quarter was 27.9% and our non-GAAP gross margin rate was 29.5%. Our non-GAAP gross margin percent increased by 2.7 points from the third quarter, and was about a point higher than our Q4 guidance provided in October, primarily due to favorable product mix. We currently expect our non-GAAP gross margin percent to be down slightly in the first quarter to between 28% and 29% as we expect to have a different product mix than we experienced in the fourth quarter. That being said, we expect our non-GAAP gross margin rate to be up for the full year to between 30% and 32%.

R&D and SG&A expenses totaled $22.5 million in the fourth quarter, which is up approximately $1.7 million from the third quarter. Non-GAAP R&D and SG&A expenses totaled $19.8 million, which is up $900 thousand from the prior quarter. The increase is primarily related to a full quarters worth of operating expenses associated with our media server business. We currently expect first quarter R&D and SG&A expenses to be about flat from the fourth quarter.

Our legacy intangible amortization excluding our acquisition of Convedia was $133 thousand in the fourth quarter and we expect it to continue at this level throughout 2007.

We recorded a restructuring charge of $313 thousand in the fourth quarter for employee-related expenses associated with the planned closure of our North Carolina facility that supports production out of our contract manufacturer’s plant, as well as for employee-related expenses associated with Hillsboro support staff that directly supported our partner’s Mexico facilities.

Our fourth quarter non-operating income, which includes interest income, interest expense and other non-operating items, was $1.8 million. As expected, it was down by $400 thousand from the third quarter due to the impact of a full quarter of forgone interest income related to the acquisition of approximately $800 thousand offset by a supplier settlement gain of $400 thousand that is excluded from our non-GAAP results. We expect non-operating income to be about $1.1 million in the first quarter based on our anticipated cash balances.

Our fourth quarter tax rate was 34% and our non-GAAP tax rate was 93%. Our overall tax benefit was higher than expected due to recognizing foreign and domestic tax benefits that were previously reserved for. Our 2006 annual tax rate was 5% and our non-GAAP tax rate was 18%. We currently expect our 2007 tax rate to be around 16% and our non-GAAP tax rate to be around 24%; however this can vary depending on our expected revenue and earnings mix for the year.

Our basic weighted average shares increased to 21.6 million in the fourth quarter from 21.3 million in the third quarter mainly attributed to the issuance of shares for ESPP purchases and stock option exercises by our employees. We expect our basic share count to be around 21.8 million in the first quarter and our diluted share count to be around 22.0 million excluding our convertible notes. As a reminder, we use basic weighted average shares to calculate net loss per share. Furthermore, for net income less than $1.2 million, our diluted shares will exclude the effect of our convertible notes of 4.2 million shares and the associated interest, as including them would be anti-dilutive.

For the year, revenues were $292.5 million or up 12% compared to 2005 revenues of $260.2 million. Our annual net loss was $13.0 million or $0.62 per share compared to 2005 net income of $16.0 million or $0.68 per diluted share. Annual non-GAAP net income was $12.0 million or $0.50 per diluted share compared to $14.7 million or $0.62 per diluted share in 2005. The decline of $2.7 million is mainly due to lower gross margins for the year in addition to higher operating expenses associated with our incremental investments in our standard products as well as operating losses associated with our acquisition of Convedia.

Moving to the balance sheet, our total cash and investments decreased by $16 million to $136 million at the end of the fourth quarter. The decrease in cash this quarter was mainly due to our increase in inventory along with the cash outflow of acquisition related expenses that were incurred in the prior quarter. Net cash, which we define as cash and investments less our convertible debt at face value, was approximately $34 million at the end of the quarter. We expect cash and investments to decrease by around $12 million in the first quarter related to the timing of Q4 inventory payments as well as the timing of our AR collections. However, we fully expect to generate positive cash flow again starting in the second quarter.

Our trade receivables decreased by $11.4 million to $42.6 million on a revenue decrease of $20.7 million. DSO for the fourth quarter was 64 days, which is up from 60 days in the third quarter mainly due to timing of shipments within the quarter. We expect DSO to be in the low 70’s in the first quarter as we anticipate a larger portion of the quarter’s accounts receivable payments to occur in the second quarter given the timing of shipments.

During the fourth quarter we increased our inventory by approximately $14 million to $35.2 million. Inventory turns were 5.0, which is down from 11.4 turns in the prior quarter. This increase was driven by the transition of production out of our contract manufacturing partner in Monterey, Mexico to our internal Hillsboro, Oregon plant and to our contract manufacturer in China. The increase is also a result of taking on additional inventory to extend production with our CM in Charlotte, North Carolina. The net increase in inventory is intended to be transitional and we expect to see inventory levels start to decline after the first quarter and continue to decline throughout the year to more traditional levels.

Capital expenditures were $1.1 million and depreciation expense was $1.3 million in the fourth quarter. We expect depreciation to stay at approximately this same level in the first quarter. However, we do plan to increase capital expenditures to between $1.5 and $2.0 million in the first quarter as we make some new R&D and IT capital investments.

Our cash cycle time increased to 55 days from 12 days in the prior quarter. This is mostly due to our increased inventory balance this quarter. We do expect cash cycle to go back down to the low 30’s when our inventory is back to more normal levels by the end of the year.

Now I’ll turn it back over to Scott to talk about the outlook for the first quarter.

Scott Grout:

Regarding our outlook for the first quarter, please note that this is our view as of today, and it is a forward-looking statement subject to risks and uncertainties as discussed previously and in our press release made available earlier today.

We currently expect first quarter revenues to increase sequentially to between $62 and $68 million, driven by projected increases in our wireless market. We expect first quarter results to be a loss in the range of $0.33 to $0.27 per share, and our non-GAAP results to be between a loss of $0.03 per share to income of $0.03 per diluted share. Our projected non-GAAP results exclude a loss of approximately $0.30 per share primarily attributable to the impact of acquisition-related expenses, stock-based compensation expense and restructuring charges. Our press release issued today includes a reconciliation of the first quarter guidance range of GAAP loss per share to the non-GAAP loss and income per share. For the year, we currently expect revenue and earnings to grow modestly over 2006. We believe that the drivers for more meaningful growth will be determined by the timing of our customers’ next generation system deployments.

As stated earlier, I am pleased with the Company’s progress in 2006 in furthering our strategy to be the leading provider of embedded solutions across our target markets. We continue to make significant investments in our Promentum, Convedia and Procelerant product lines and these investments are resulting in a strong level of design awards for future business. We believe that the market acceptance and enthusiasm around our new products is strong and that our solutions will enable our customers to bring better products to market faster and at a lower total cost.

Thank you for your time and with that I believe we are ready to take your questions.

Operator:

At this time I would like to remind everyone, if you would like to ask a question, please press “*” then the number 1 on your telephone keypad. We’ll pause for just a moment to compile the Q&A roster.

Our first question comes from Brian White with Jefferies & Company, Inc.

Brian White:

Hi, good afternoon. When you look at the wireless market for 2007, what type of growth should we think about?

Scott Grout

So our expectation, at this point, is our big wireless customer should be returning to normal growth rates and then we at RadiSys will experience the ups and downs that they see in the market. I think our current view is in line with the industry point of view and should be modest growth ’06 to ’07.

Brian White:

When you say “modest” are we talking high single digits or low double digits? It’s nothing more than that. Is that right?

Brian Bronson:

Mid to high single digits, Brian.

Brian White:

When we think about just the March quarter, some people expect a little bit more of a bounce in terms of sales. Is that just cautiousness because you don’t really know or is that what you’re seeing right now?

Scott Grout

I think it’s in line with what we’re seeing right now. So from a wireless perspective, that business has come back nicely. We expect that business to come back to more normal rates. As mentioned, Nortel ended up being really big for us in Q4 and that will return back to normal levels as well.

Brian White:

Just go into what exactly is happening with Nortel. Why did it increase so significantly in the December quarter?

Scott Grout

So recall, this business is around Nortel’s IP PBX systems. Which is alegacy product line that we’ve been working with Nortel on. That business ends up high if the quarter goes really well and low if it goes poor from an end customer perspective. So intervals are pretty short from design award to actual execution and delivery. So mostly it depends on what’s happening in that market.

Brian White:

Scott, can you give us your just general thoughts on the macro environment for tech and communications for 2007? What you are seeing? What are your customers saying?

Scott Grout:

So regarding the macro environment for tech and communications for ’06 to ’07, I’m feeling reasonably good about it. The feedback I’m getting from customers is that it won’t be a blockbuster year but I don’t think I’m hearing from any customers that they expect degradation.

Potential upsides are 3G wireless or 3G license awards in China. IMS deployments represent upsidesfor RadiSys. But I think the basic business for ’06 to ’07 feels reasonably good.

Brian White:

Thank you.

Operator:

Your next question comes from David Duley with Merriman Curham Ford & Co.

David Duley:

I’ve got a couple of questions. I noticed as you articulated that your inventory balances were going to go up, it seems like they went up about 40 days as far as the days outstanding measurement as you brought stuff back in house. Is that the level of inventory days we should expect going forward or will we have some flushing out of things which would maybe get RadiSys down to 40 or 50 days again?

Brian Bronson:

I think that’s a reasonable expectation by the end of this year. So it’s going to take a little while to turn around the inventory; but, starting after the first quarter we should start to see a decline and then, to your point, get back to more historical levels.

David Duley:

So I didn’t want to put a number in your mouth but I kind of did. Is that the right range to think about? Maybe by year end we could take 20 days out of the balance?

Brian Bronson:

Yes.

David Duley:

Did I hear you right when you talked about gross margins for the year? When we add up things at the end of the year they’re going to be in the range of 30% to 32% on a non-GAAP basis? If that’s the right number that I heard, could you help us understand how we go from the current margin level to that margin level throughout the year?

Brian Bronson:

Yes, and Dave you heard it correct. So it’s 30% to 32% and there’s actually quite a bit of variability in our model, just as you’ve seen historically, but as designs wins ramp toward the end of the year, as well as, anticipated growth in the MSBU business, our media server business, particularly around IMS deployments in 3G. The media server business has got much higher gross margins, so if all goes as planned, that business will be a large driver to our overall improvement in gross margins.

David Duley:

Is that the primary reason? Is there any benefit of manufacturing more in-house to higher levels of volumes and leveraging those fixed costs?

Brian Bronson:

A bit, Dave. But a major driver is product mix.

David Duley:

One more quick question from me and I’ll turn it over to somebody else and, if needed, I’ll circle back. What was the actual stock-based comp hit to the EPS line in the fourth quarter? What would we expect that number to be in the first quarter?

Brian Bronson:

So in the fourth quarter it was $2.1 million and we expect it to go to about $2.3 million in the first quarter.

David Duley:

If I just apply your normal tax rate, is that how we would figure out what the tax impact is?

Brian Bronson:

That’s right. On a non-GAAP basis our tax rate will be about 24% and then if you’re working GAAP it’s 16%.

David Duley:

Thank you.

Operator:

Your next question comes from Rob Stone with Cowen & Company.

Rob Stone:

Would you comment on the expected level of gross margins and operating expenses in Q107?

Brian Bronson:

So on the gross margin line, 28% to 29% was the range that we provided. On an combined SG&A and R&D basis we would be flat with the fourth quarter.

Rob Stone:

So in terms of any further operating expense reduction programs or restructuring, that’s basically done. So the effect of this is the run rate at this point, correct?

Brian Bronson:

Yes, for the most part. You’ll see slight growth. Predicated on revenue growth throughout the year but we’re leveling off our investment in R&D and then looking for SG&A to scale with revenue growth throughout the year. So modest growth in expenses but expansion of earnings relative to the revenue growth.

Rob Stone:

Regards to the gross margins, I understand the product mix issue and so forth as the year unfolds. What was it that caused the gross margins to be better than you expected in the fourth quarter?

Brian Bronson:

Product mix. So it relates to the same phenomena. So, again, it will vary by a good point plus from quarter to quarter depending on mix. But, in general, it’s just an improved product mix relative to the prior quarter.

Operator:

Your next question comes from Douglas Ashton with FTN Midwest Securities Corp.

Douglas Ashton:

In regards to design wins and Convedia, if I remember correctly that’s two things that you’re not going to break out for us, right? You’re going to give us design win totals at certain points during the year but not every quarter?

Brian Bronson:

Yes, that’s right.

Douglas Ashton:

I thought that was true but I thought I would ask.

Brian Bronson:

One point of clarification Doug, too, so our media server business will be part and is part of our IP networking and messaging sub-market that we report but we won’t break it out separately. And one other point to note is that we haven’t decided on a way to disclose new business won with our media server business. So the design win information that we provided over the last two years excludes our media server business.

Douglas Ashton:

I just want to come back to the Nortel thing one more time. It seems to me they were probably favorable to the product mix because the revenues were so large. Does that tend to be a little bit higher margin business than corporate averages or is that not true?

Scott Grout

We influence it a bit more with our larger wireless company customer being lower. That probably had more influence on the favorable impact.

Brian Bronson

And, frankly, a full quarter’s worth of our media server business.

Douglas Ashton:

It was abnormally large and so I just wonder if there’s something there. I actually don’t have any other questions. Thanks guys.

Operator:

Your next question comes from Manish Vora with Monness, Crespi, Hardt & Co., Inc.

Manish Vora:

Can you guys tell us what kind of ATCA revenues we booked in ’06?

Brian Bronson:

No, we’re not going to specifically disclose that. As you can probably imagine it was a pretty small number.

Manish Vora:

I was just trying to understand the guidance for the full year. You said that the moderate growth in the wireless business is going to be low to mid single digits, or mid to high single digits. Is that the same for the moderate growth for the overall business for ’07?

Scott Grout:

That’s correct.

Manish Vora:

Another statement you guys made was that more meaningful growth is dependent on product deployment. Are we to imply that there is very little ramp from ’05 to ’06 right now embedded in the ’07 moderate growth guidance for ATCA business? Are we to assume that in terms of the ATCA ramp in what you’re guiding to for ’07, that there is not much embedded in the guidance that we’re being given? So what I’m trying to get a sense of is that we’re seeing higher margins, significantly higher gross margins for ’07 versus ’06 and moderate growth in the wireless business.

Would that assumption of “not a large ramp in ATCA” not apply for the full year 2007? And if there is higher growth in the ATCA business that would be reflected in overall higher growth of the business?

Scott Grout:

So a couple of comments that might sound contradictory. We do, in our plan, have pretty significant growth from ’06 to ’07 and even at that rate ATCA is probably not material in ’07. We continue to believe that meaningful customer ramp happens in the ’08 timeframe. They do sound in conflict but there is nice growth ’06 to ’07 but probably not enough to make a big dent.

Manish Vora:

In the overall growth rate?

Scott Grout:

Yes.

Manish Vora:

In terms of the gross margin ramp, would we expect the gross margins to really ramp in the back half of the year as there can be a steady ramp up about starting Q2?

Scott Grout:

More the back half of the year, Manish.

Operator:

Your next question comes from David Nierenberg with Nierenberg Investment Management Company.

David Nierenberg:

Can I ask you three revenue related questions? Long-term revenue related questions all at once and then you can unpack them as you wish. First, I wanted to get some more color on the integration of and prospects for Convedia. Second, I wanted to hear your latest thinking about the impact of the combination with Siemens on your expectations for Nokia. And third, I wanted to see if relative to our last quarterly earnings call whether there has been any further stretch out or change in your timing for the expected long term ramp up of the ATCA business.

Scott Grout:

I’ll take those in reverse order, if that’s okay. So regarding the ramp up of the ATCA business, there hasn’t been any push out since last quarter when we talked. We did mention that we began second half delivery of our platforms to customers to begin their deployment so that was a real key milestone done on time.

So this will help us get more visibility into how their development programs are going and subsequently how their ramp will ultimately go. So no push out and we hit a pretty critical milestone, starting to deliver systems to them so they could start development.

Regarding the impact of Nokia- Siemens, appropriately both companies have done a really good job on keeping their planning quiet, confidential to a very “firewalled” team. So information flow, as one would hope, is pretty limited with respect to what the ultimate integration of the two companies looks like.

As most people on the call know, we’ve got a very strong position with Nokia that we continue to earn every day and our best hope is that this represents a net improvement in our business outlook as Nokia and Siemens join together.

But I believe that’s not formally scheduled to close until end of Q1, and at that point we should start to see more visibility unfold. But our view, our hope and our belief right now is it should be net goodness for us.

With respect to integration, as I had mentioned, the logistics of integration have gone very well. The sales team cross-training and cross-selling is starting to take place now. As we go into ’07 we will create integrated product plans so that we can capitalize on the cool technology that Convedia brings us along with our technology.

So I would expect as we go through ’07, to start to see some combined offerings between the two companies; such as, taking software media server and putting it on ATCA and bringing their media processing capability into broader product line.

In addition to it being a very attractive business and opportunity for us, we do want to do integration of their technology and capitalize on the customers that they bring to us. So at this point, after a couple of months looking at it, we’re pretty pleased with integration and outlook.

Operator:

Your next question comes from Matt Petkun with D.A. Davidson & Company.

Matt Petkun:

One thing that always continues to surprise me when you guys report results, is that your operating expenses are below my expectations pretty much every time. What I’m trying to get my hands around this time is the integration, along the same lines as what David was asking, have we seen the full impact of Convedia in your results? Obviously you had lower revenue levels yourselves, so the apples to apples comparison is not exact but have we seen the full impact of Convedia?

Brian Bronson

Yes, you have Matt.

Matt Petkun:

I’m trying to remember where you initially placed Convedia as break even and where you believe it might be now. Obviously it’s integrated but what types of revenue levels will Convedia need to hit to be break even on a pro forma basis?

Brian Bronson

So Matt, so it is dilutive today and what we said is it will be accretive in the second half of 2007. And for it to be accretive it needs to be about $1.5 million of operating income per quarter. And so we won’t go into specific revenue levels but you’ve seen a public filing that gives you historical revenue levels, i.e. what it was the middle of last year and you can project from there.

Scott Grout:

And that second half point of view is the same as when we originally closed the deal.

Brian Bronson:

That’s right.

Matt Petkun:

So you’re not too far away then in reality?

Brian Bronson:

So it’s getting better. It’s still dilutive and revenue needs to grow and particularly IMS deployments need to happen in the second half of the year for it to be accretive.

Matt Petkun:

That’s all I had. Thank you.

Operator:

Your next question comes from Bill Frerichs with Radner Wood Partners.

Bill Frerichs:

Good afternoon. I have a question, and this is a macro question. I’m trying to get a sense of with where you are sticky with your customers. Would you say that maybe fill in the blanks? Say you are extremely sticky with ___ % of your customers, somewhat sticky with ____%, and not sticky with another ____%? In terms of expanded servicesavailable?

Scott Grout:

Inherent in our model of providing embedded systems to our customers is that it is a pretty sticky model for both us and our peers in the industry.

Bill Frerichs:

Once you’ve been designed in?

Scott Grout:

Yes, once you’ve been designed in. So although we’re doing standard-based products, even when the same ATCA system is delivered to two different customers, they’ll use it in two different ways with quite a bit of hand holding. So for both us and our peers it ends up being a pretty sticky model. It’s also pretty normal to be the sole source. It’s a big challenge for them to say, “For the same box we’re going to use two different suppliers for it.”

Bill Frerichs:

So essentially it all depends on the win and then the win is a very highly engineered sale.

Scott Grout:

Yes. Of course, the critical parameter is our own customers’ development cycle and go-to-market cycle. Our revenue ramp is just so strongly dependent on that.

Bill Frerichs:

So the shortfall with Nokia was largely caused by what?

Scott Grout:

Well, we have to be a little bit careful about that. So they clearly fell below their normal run rate in Q4. They had tried to clean up inventory a little bit and get to a target level that probably pushed them down to a level a little bit lower than they normally run.

Bill Frerichs:

Is it fair to say that within Nokia now, generally speaking, the former Nokia folks are running the handset business and the Siemens folks are essentially in charge of the base station business?

Scott Grout:

Here, again, I have to be very careful. Certainly the former is true, that Nokia runs the handset business as that’s an all-Nokia business. In the combination of Nokia and Siemens, the leadership structure will be mixed and combined. The appointed CEO of Nokia Siemens Networks is from Nokia. A number of the executives are from Nokia. A number are from Siemens. So we expect and are seeing a pretty healthy mix.

Bill Frerichs:

So your goodwill will probably persist in the organization.

Scott Grout:

We are working on that, yes.

Operator:

You have a follow up question from David Duley with Merriman.

David Duley:

Just a question on your gross margin guidance for the year. The way the math would work out is, if you’re starting off at 28% or 29% and you’re going to finish off the year in the range that you talked about, then clearly one quarter is going to be above that range or in the 33% and 34% range.

That’s a range of gross margins I don’t think any of us have seen for a long time. I just was wondering if that’s the way the math works out in your head? Is that all again coming back to the IMS/Convedia ramp really helping these margins and a return of higher levels of volumes?

Brian Bronson:

Yes, so again, Dave, there is a large range of variability, or 30% to 32% and yes, mainly driven off of growth with our media server business, again, based on the timing of deployments with IMS.

David Duley:

In Q3 or Q4 you have to have a 34% margin to hit that, right?

Brian Bronson:

Yes, depending in where we hit within the range, yes that’s correct. That’s how the math would work.

David Duley:

One other thing, a little bit more specific math, your largest customer when you do the math was roughly at $11 million run rate in the quarter. To listen to your guidance statements I noted a roughly $5 million sequential increase, and I thought what you said that this was mainly driven by wireless. And then, what I’m hearing from you is, Nortel returns to normal levels of business. I’m not quite sure what that is anymore, but I think that’s another $4 or $5 million of impact. Does that really imply, when you do that math, that the largest customer’s business is roughly going to double sequentially quarter to quarter?

Scott Grout:

That’s possible, Dave. That’s the way to think about it.

David Duley:

Okay, thank you.

Operator:

Once again, if you would like to ask a question, please press “*” then the number 1 on your telephone keypad.

You have a follow up question from David Nierenberg with Nierenberg Investment Management Company.

David Nierenberg:

My recollection is that you guys talk about the ATCA order funnel, not on every call but every other call. Is this a call when you can talk about it or isn’t it?

Scott Grout:

It is not. It is next call.

David Nierenberg:

Do you want to talk about it anyway?

Scott Grout:

So I will interject a qualitative statement. 2006 ended as a good year. So I think the last time we talked about the ATCA order funnel was the end of Q3’06. So we booked another quarter and we’re pretty happy with how it came out.

Operator:

At this time there are no further questions.

Scott Grout:

Okay, thank you Melissa and I want to thank everybody for your continued support and look forward to working together in ’07. Thanks.

Operator:

This concludes the RadiSys Quarter 4 Earnings Release conference call. You may now disconnect.

END

Operator:	Good afternoon. My name is Melissa and I will be your conference operator today. At this time I would like to welcome everyone to the RadiSys Quarter 4 Earnings Release conference call. All lines have been placed on mute to prevent any background noise.

	After the speakers’ remarks there will be a question and answer session. If you would like to ask a question during this time, simply press “*” then the number 1 on your telephone keypad. If you would like to withdraw your question, press “#”. Thank you. I will now turn the conference over to Scott Grout, CEO and President of RadiSys. Please go ahead.

Scott Grout:	Good afternoon and thank you for participating in our fourth quarter conference call. In this call we will review our financial and strategic results for the fourth quarter and full year 2006, as well as our outlook for the first quarter of 2007 and then, as always, open the call for questions. Participating on the call today are Brian Bronson, our Chief Financial Officer and myself, Scott Grout, President and CEO. Before we get started I’d like to turn the call over to Brian for a caution about forward-looking statements.

Brian Bronson:	Thanks, Scott. Any statements in this call regarding future expectations for the business of RadiSys constitute forward-looking statements that involve a number of risks and uncertainties. We caution you not to place undue reliance on these statements. Factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in our earnings release today, which may be found on our web site at www. radisys.com, and in our SEC filings, including our 2005 Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. All information provided in this call is as of February 1, 2007. RadiSys undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

	In addition, we will be referring to certain non-GAAP financial measures during this call that exclude the effects of stock-based compensation and acquisition related costs such as intangible amortization, purchase price accounting adjustments, amortization of deferred compensation, and integration expenses in addition to restructuring charges and a supplier settlement gain. For a reconciliation of our non-GAAP financial measures, please refer to our earnings release issued today, which is available in the investor relations section of our website at www.radisys.com.

	Now, I’ll turn the call back over to Scott.

Scott Grout:	Thank you, Brian. Our results for the fourth quarter came in better than expected. Our revenue for the fourth quarter was $60.7 million and our net loss was $5.5 million or $0.25 per share. We were approximately breakeven on a non-GAAP basis versus our non-GAAP guidance of a loss of $0.04 to $0.09 per share. The GAAP and non-GAAP fourth quarter results per share exceeded our previously issued fourth quarter guidance due to improved gross margins, a reduction in operating expenses and a higher tax benefit relative to guidance. We ended 2006 with revenue growth of 12% over 2005 with a majority of the growth in our strategically targeted markets. Our wireless and medical revenues both grew 21% over 2005 and from a global perspective, our revenues in Europe and Asia Pacific increased 14% over 2005.

	We made significant progress on our strategies in 2006. We were awarded record levels of new standard product business in both our communications and commercial markets last year. While these awards are non-committal and can take one to two years to begin to ramp, we believe they will be key drivers to our future growth. In the year, we were awarded new business in a diverse set of applications including 3G wireless infrastructure, IP security, wireless billing, IPTV, XML routing servers, IP media processing, test and measurement and medical imaging. I continue to be very pleased with our awards and the overall market acceptance of our products.

	In 2006, we also completed the successful acquisition of Convedia Corporation, the leading provider of IP media processing platforms. We believe that this acquisition accelerates our strategy to provide higher-value, application-ready platforms. We also increased revenues in our strategic markets such as medical equipment and increased our international revenues. This past year, we did a lot of work in operations to fully implement RoHS, expand our Asian operations and resolve issues with our North American EMS.

	In the second half of 2006 our new Promentum SYS-6010, the industry's first 10 gigabit ATCA managed platform began shipping to customers for their development programs. We have delivered dozens of 6010 systems to a number of different customers to enable them to begin development of their applications. In addition, in the fourth quarter we announced our newest ATCA asset, the ATCA-7200. The 7200 is a very high performance modular gigabit line card equipped with up to four Cavium OCTEON Plus processor AMCs. We also announced the new AMC-7211 that provides power efficient packet and security processing for customers. Both products have been well received in the market and we expect to begin delivery of evaluation units in the second quarter. For our Commercial markets, we also announced two new products as well. First is our new Procelerant RMS420, a 4U high performance embedded server with two dual-core processors. The second is our new Procelerant CE945GM dual-core COM-Express Module. Both products are expected to ship in the first quarter.

	I also want to give you an update on our Convedia integration efforts. I am very pleased with our progress integrating Convedia into our operations and I believe we are well on track to create a strong and unified business. We view this acquisition as a meaningful strategic accelerator for RadiSys that is intended to expand our platform solutions business as well as broaden our base of new customer, new products and new technologies. As stated previously, we expect media server revenue growth will be driven by network operators moving from current generation TDM networks to next generation IP-enabled IMS networks. We continue to believe that this acquisition will become accretive on a non-GAAP basis in the second half of 2007.

	Shifting gears to our fourth quarter results, our revenues by market were derived as follows:

	·	70% or $42.3 million of fourth quarter revenues were from our Communications Networking market, a growth of 12% over 2005. This market includes wireless infrastructure, IP networking and messaging and other networking infrastructure. Wireless networks represented 20% of total revenues for the quarter. We expect our wireless market revenues to increase in the first quarter as one of our larger customers returns to more traditional volumes.

		Revenues from IP networking and messaging were 36% of total revenue for the quarter. We currently expect our IP networking and messaging revenues to decrease in the first quarter as our business with Nortel decreases from 17% of total revenues in the fourth quarter to more normal levels in the first quarter.

	·	30% or $18.4 million, of fourth quarter revenues were from our Commercial Systems market which grew 13% over 2005. The Commercial market includes medical imaging and diagnostic systems, test and measurement equipment, transaction terminals, and semiconductor and manufacturing capital equipment. Medical systems represented a record 15% of total revenues for the quarter and for the year grew 21% over 2005. This growth is very much in line with our strategic focus in this market.

	Our top five customers for the quarter were Avaya, Comverse, Nokia, Nortel and Philips Medical. Collectively, our top five customers represented 57% of our revenue for the quarter. Nokia represented 18% and Nortel represented 17% of fourth quarter revenues. From a geographic perspective, 46% of our revenue came from North America, 45% from Europe, and 9% from Asia Pacific. Asia Pacific revenues as a percent of total revenue decreased sequentially mainly due to the decrease in wireless revenues in the fourth quarter.

	With that, I’d now like to turn the call back over to Brian, who will give you some additional information about our fourth quarter financial results.

Brian Bronson:	Thanks, Scott. As Scott mentioned previously, our revenue for the fourth quarter totaled $60.7 million. Our net loss for the quarter was $5.5 million, or $0.25 per share. Non-GAAP net loss was $40 thousand or approximately break-even on a per share basis. As detailed in the GAAP to non-GAAP reconciliation in our press release, fourth quarter non-GAAP net income excludes the effect of acquisition-related expenses, stock-based compensation expense, restructuring charges and a supplier settlement gain.

	Our gross margin percentage for the fourth quarter was 27.9% and our non-GAAP gross margin rate was 29.5%. Our non-GAAP gross margin percent increased by 2.7 points from the third quarter, and was about a point higher than our Q4 guidance provided in October, primarily due to favorable product mix. We currently expect our non-GAAP gross margin percent to be down slightly in the first quarter to between 28% and 29% as we expect to have a different product mix than we experienced in the fourth quarter. That being said, we expect our non-GAAP gross margin rate to be up for the full year to between 30% and 32%.

	R&D and SG&A expenses totaled $22.5 million in the fourth quarter, which is up approximately $1.7 million from the third quarter. Non-GAAP R&D and SG&A expenses totaled $19.8 million, which is up $900 thousand from the prior quarter. The increase is primarily related to a full quarters worth of operating expenses associated with our media server business. We currently expect first quarter R&D and SG&A expenses to be about flat from the fourth quarter.

	Our legacy intangible amortization excluding our acquisition of Convedia was $133 thousand in the fourth quarter and we expect it to continue at this level throughout 2007.

	We recorded a restructuring charge of $313 thousand in the fourth quarter for employee-related expenses associated with the planned closure of our North Carolina facility that supports production out of our contract manufacturer’s plant, as well as for employee-related expenses associated with Hillsboro support staff that directly supported our partner’s Mexico facilities.

	Our fourth quarter non-operating income, which includes interest income, interest expense and other non-operating items, was $1.8 million. As expected, it was down by $400 thousand from the third quarter due to the impact of a full quarter of forgone interest income related to the acquisition of approximately $800 thousand offset by a supplier settlement gain of $400 thousand that is excluded from our non-GAAP results. We expect non-operating income to be about $1.1 million in the first quarter based on our anticipated cash balances.

	Our fourth quarter tax rate was 34% and our non-GAAP tax rate was 93%. Our overall tax benefit was higher than expected due to recognizing foreign and domestic tax benefits that were previously reserved for. Our 2006 annual tax rate was 5% and our non-GAAP tax rate was 18%. We currently expect our 2007 tax rate to be around 16% and our non-GAAP tax rate to be around 24%; however this can vary depending on our expected revenue and earnings mix for the year.

	Our basic weighted average shares increased to 21.6 million in the fourth quarter from 21.3 million in the third quarter mainly attributed to the issuance of shares for ESPP purchases and stock option exercises by our employees. We expect our basic share count to be around 21.8 million in the first quarter and our diluted share count to be around 22.0 million excluding our convertible notes. As a reminder, we use basic weighted average shares to calculate net loss per share. Furthermore, for net income less than $1.2 million, our diluted shares will exclude the effect of our convertible notes of 4.2 million shares and the associated interest, as including them would be anti-dilutive.

	For the year, revenues were $292.5 million or up 12% compared to 2005 revenues of $260.2 million. Our annual net loss was $13.0 million or $0.62 per share compared to 2005 net income of $16.0 million or $0.68 per diluted share. Annual non-GAAP net income was $12.0 million or $0.50 per diluted share compared to $14.7 million or $0.62 per diluted share in 2005. The decline of $2.7 million is mainly due to lower gross margins for the year in addition to higher operating expenses associated with our incremental investments in our standard products as well as operating losses associated with our acquisition of Convedia.

	Moving to the balance sheet, our total cash and investments decreased by $16 million to $136 million at the end of the fourth quarter. The decrease in cash this quarter was mainly due to our increase in inventory along with the cash outflow of acquisition related expenses that were incurred in the prior quarter. Net cash, which we define as cash and investments less our convertible debt at face value, was approximately $34 million at the end of the quarter. We expect cash and investments to decrease by around $12 million in the first quarter related to the timing of Q4 inventory payments as well as the timing of our AR collections. However, we fully expect to generate positive cash flow again starting in the second quarter.

	Our trade receivables decreased by $11.4 million to $42.6 million on a revenue decrease of $20.7 million. DSO for the fourth quarter was 64 days, which is up from 60 days in the third quarter mainly due to timing of shipments within the quarter. We expect DSO to be in the low 70’s in the first quarter as we anticipate a larger portion of the quarter’s accounts receivable payments to occur in the second quarter given the timing of shipments.

	During the fourth quarter we increased our inventory by approximately $14 million to $35.2 million. Inventory turns were 5.0, which is down from 11.4 turns in the prior quarter. This increase was driven by the transition of production out of our contract manufacturing partner in Monterey, Mexico to our internal Hillsboro, Oregon plant and to our contract manufacturer in China. The increase is also a result of taking on additional inventory to extend production with our CM in Charlotte, North Carolina. The net increase in inventory is intended to be transitional and we expect to see inventory levels start to decline after the first quarter and continue to decline throughout the year to more traditional levels.

	Capital expenditures were $1.1 million and depreciation expense was $1.3 million in the fourth quarter. We expect depreciation to stay at approximately this same level in the first quarter. However, we do plan to increase capital expenditures to between $1.5 and $2.0 million in the first quarter as we make some new R&D and IT capital investments.

	Our cash cycle time increased to 55 days from 12 days in the prior quarter. This is mostly due to our increased inventory balance this quarter. We do expect cash cycle to go back down to the low 30’s when our inventory is back to more normal levels by the end of the year.

	Now I’ll turn it back over to Scott to talk about the outlook for the first quarter.

Scott Grout:	Regarding our outlook for the first quarter, please note that this is our view as of today, and it is a forward-looking statement subject to risks and uncertainties as discussed previously and in our press release made available earlier today.

	We currently expect first quarter revenues to increase sequentially to between $62 and $68 million, driven by projected increases in our wireless market. We expect first quarter results to be a loss in the range of $0.33 to $0.27 per share, and our non-GAAP results to be between a loss of $0.03 per share to income of $0.03 per diluted share. Our projected non-GAAP results exclude a loss of approximately $0.30 per share primarily attributable to the impact of acquisition-related expenses, stock-based compensation expense and restructuring charges. Our press release issued today includes a reconciliation of the first quarter guidance range of GAAP loss per share to the non-GAAP loss and income per share. For the year, we currently expect revenue and earnings to grow modestly over 2006. We believe that the drivers for more meaningful growth will be determined by the timing of our customers’ next generation system deployments.

	As stated earlier, I am pleased with the Company’s progress in 2006 in furthering our strategy to be the leading provider of embedded solutions across our target markets. We continue to make significant investments in our Promentum, Convedia and Procelerant product lines and these investments are resulting in a strong level of design awards for future business. We believe that the market acceptance and enthusiasm around our new products is strong and that our solutions will enable our customers to bring better products to market faster and at a lower total cost.

	Thank you for your time and with that I believe we are ready to take your questions.

Operator:	At this time I would like to remind everyone, if you would like to ask a question, please press “*” then the number 1 on your telephone keypad. We’ll pause for just a moment to compile the Q&A roster.

	Our first question comes from Brian White with Jefferies & Company, Inc.

Brian White:	Hi, good afternoon. When you look at the wireless market for 2007, what type of growth should we think about?

Scott Grout	So our expectation, at this point, is our big wireless customer should be returning to normal growth rates and then we at RadiSys will experience the ups and downs that they see in the market. I think our current view is in line with the industry point of view and should be modest growth ’06 to ’07.

Brian White:	When you say “modest” are we talking high single digits or low double digits? It’s nothing more than that. Is that right?

Brian Bronson:	Mid to high single digits, Brian.

Brian White:	When we think about just the March quarter, some people expect a little bit more of a bounce in terms of sales. Is that just cautiousness because you don’t really know or is that what you’re seeing right now?

Scott Grout	I think it’s in line with what we’re seeing right now. So from a wireless perspective, that business has come back nicely. We expect that business to come back to more normal rates. As mentioned, Nortel ended up being really big for us in Q4 and that will return back to normal levels as well.

Brian White:	Just go into what exactly is happening with Nortel. Why did it increase so significantly in the December quarter?

Scott Grout	So recall, this business is around Nortel’s IP PBX systems. Which is alegacy product line that we’ve been working with Nortel on. That business ends up high if the quarter goes really well and low if it goes poor from an end customer perspective. So intervals are pretty short from design award to actual execution and delivery. So mostly it depends on what’s happening in that market.

Brian White:	Scott, can you give us your just general thoughts on the macro environment for tech and communications for 2007? What you are seeing? What are your customers saying?

Scott Grout:	So regarding the macro environment for tech and communications for ’06 to ’07, I’m feeling reasonably good about it. The feedback I’m getting from customers is that it won’t be a blockbuster year but I don’t think I’m hearing from any customers that they expect degradation.

	Potential upsides are 3G wireless or 3G license awards in China. IMS deployments represent upsidesfor RadiSys. But I think the basic business for ’06 to ’07 feels reasonably good.

Brian White:	Thank you.

Operator:	Your next question comes from David Duley with Merriman Curham Ford & Co.

David Duley:	I’ve got a couple of questions. I noticed as you articulated that your inventory balances were going to go up, it seems like they went up about 40 days as far as the days outstanding measurement as you brought stuff back in house. Is that the level of inventory days we should expect going forward or will we have some flushing out of things which would maybe get RadiSys down to 40 or 50 days again?

Brian Bronson:	I think that’s a reasonable expectation by the end of this year. So it’s going to take a little while to turn around the inventory; but, starting after the first quarter we should start to see a decline and then, to your point, get back to more historical levels.

David Duley:	So I didn’t want to put a number in your mouth but I kind of did. Is that the right range to think about? Maybe by year end we could take 20 days out of the balance?

Brian Bronson:	Yes.

David Duley:	Did I hear you right when you talked about gross margins for the year? When we add up things at the end of the year they’re going to be in the range of 30% to 32% on a non-GAAP basis? If that’s the right number that I heard, could you help us understand how we go from the current margin level to that margin level throughout the year?

Brian Bronson:	Yes, and Dave you heard it correct. So it’s 30% to 32% and there’s actually quite a bit of variability in our model, just as you’ve seen historically, but as designs wins ramp toward the end of the year, as well as, anticipated growth in the MSBU business, our media server business, particularly around IMS deployments in 3G. The media server business has got much higher gross margins, so if all goes as planned, that business will be a large driver to our overall improvement in gross margins.

David Duley:	Is that the primary reason? Is there any benefit of manufacturing more in-house to higher levels of volumes and leveraging those fixed costs?

Brian Bronson:	A bit, Dave. But a major driver is product mix.

David Duley:	One more quick question from me and I’ll turn it over to somebody else and, if needed, I’ll circle back. What was the actual stock-based comp hit to the EPS line in the fourth quarter? What would we expect that number to be in the first quarter?

Brian Bronson:	So in the fourth quarter it was $2.1 million and we expect it to go to about $2.3 million in the first quarter.

David Duley:	If I just apply your normal tax rate, is that how we would figure out what the tax impact is?

Brian Bronson:	That’s right. On a non-GAAP basis our tax rate will be about 24% and then if you’re working GAAP it’s 16%.

David Duley:	Thank you.

Operator:	Your next question comes from Rob Stone with Cowen & Company.

Rob Stone:	Would you comment on the expected level of gross margins and operating expenses in Q107?

Brian Bronson:	So on the gross margin line, 28% to 29% was the range that we provided. On an combined SG&A and R&D basis we would be flat with the fourth quarter.

Rob Stone:	So in terms of any further operating expense reduction programs or restructuring, that’s basically done. So the effect of this is the run rate at this point, correct?

Brian Bronson:	Yes, for the most part. You’ll see slight growth. Predicated on revenue growth throughout the year but we’re leveling off our investment in R&D and then looking for SG&A to scale with revenue growth throughout the year. So modest growth in expenses but expansion of earnings relative to the revenue growth.

Rob Stone:	Regards to the gross margins, I understand the product mix issue and so forth as the year unfolds. What was it that caused the gross margins to be better than you expected in the fourth quarter?

Brian Bronson:	Product mix. So it relates to the same phenomena. So, again, it will vary by a good point plus from quarter to quarter depending on mix. But, in general, it’s just an improved product mix relative to the prior quarter.

Operator:	Your next question comes from Douglas Ashton with FTN Midwest Securities Corp.

Douglas Ashton:	In regards to design wins and Convedia, if I remember correctly that’s two things that you’re not going to break out for us, right? You’re going to give us design win totals at certain points during the year but not every quarter?

Brian Bronson:	Yes, that’s right.

Douglas Ashton:	I thought that was true but I thought I would ask.

Brian Bronson:	One point of clarification Doug, too, so our media server business will be part and is part of our IP networking and messaging sub-market that we report but we won’t break it out separately. And one other point to note is that we haven’t decided on a way to disclose new business won with our media server business. So the design win information that we provided over the last two years excludes our media server business.

Douglas Ashton:	I just want to come back to the Nortel thing one more time. It seems to me they were probably favorable to the product mix because the revenues were so large. Does that tend to be a little bit higher margin business than corporate averages or is that not true?

Scott Grout	We influence it a bit more with our larger wireless company customer being lower. That probably had more influence on the favorable impact.

Brian Bronson	And, frankly, a full quarter’s worth of our media server business.

Douglas Ashton:	It was abnormally large and so I just wonder if there’s something there. I actually don’t have any other questions. Thanks guys.

Operator:	Your next question comes from Manish Vora with Monness, Crespi, Hardt & Co., Inc.

Manish Vora:	Can you guys tell us what kind of ATCA revenues we booked in ’06?

Brian Bronson:	No, we’re not going to specifically disclose that. As you can probably imagine it was a pretty small number.

Manish Vora:	I was just trying to understand the guidance for the full year. You said that the moderate growth in the wireless business is going to be low to mid single digits, or mid to high single digits. Is that the same for the moderate growth for the overall business for ’07?

Scott Grout:	That’s correct.

Manish Vora:	Another statement you guys made was that more meaningful growth is dependent on product deployment. Are we to imply that there is very little ramp from ’05 to ’06 right now embedded in the ’07 moderate growth guidance for ATCA business? Are we to assume that in terms of the ATCA ramp in what you’re guiding to for ’07, that there is not much embedded in the guidance that we’re being given? So what I’m trying to get a sense of is that we’re seeing higher margins, significantly higher gross margins for ’07 versus ’06 and moderate growth in the wireless business.

	Would that assumption of “not a large ramp in ATCA” not apply for the full year 2007? And if there is higher growth in the ATCA business that would be reflected in overall higher growth of the business?

Scott Grout:	So a couple of comments that might sound contradictory. We do, in our plan, have pretty significant growth from ’06 to ’07 and even at that rate ATCA is probably not material in ’07. We continue to believe that meaningful customer ramp happens in the ’08 timeframe. They do sound in conflict but there is nice growth ’06 to ’07 but probably not enough to make a big dent.

Manish Vora:	In the overall growth rate?

Scott Grout:	Yes.

Manish Vora:	In terms of the gross margin ramp, would we expect the gross margins to really ramp in the back half of the year as there can be a steady ramp up about starting Q2?

Scott Grout:	More the back half of the year, Manish.

Operator:	Your next question comes from David Nierenberg with Nierenberg Investment Management Company.

David Nierenberg:	Can I ask you three revenue related questions? Long-term revenue related questions all at once and then you can unpack them as you wish. First, I wanted to get some more color on the integration of and prospects for Convedia. Second, I wanted to hear your latest thinking about the impact of the combination with Siemens on your expectations for Nokia. And third, I wanted to see if relative to our last quarterly earnings call whether there has been any further stretch out or change in your timing for the expected long term ramp up of the ATCA business.

Scott Grout:	I’ll take those in reverse order, if that’s okay. So regarding the ramp up of the ATCA business, there hasn’t been any push out since last quarter when we talked. We did mention that we began second half delivery of our platforms to customers to begin their deployment so that was a real key milestone done on time.

	So this will help us get more visibility into how their development programs are going and subsequently how their ramp will ultimately go. So no push out and we hit a pretty critical milestone, starting to deliver systems to them so they could start development.

	Regarding the impact of Nokia- Siemens, appropriately both companies have done a really good job on keeping their planning quiet, confidential to a very “firewalled” team. So information flow, as one would hope, is pretty limited with respect to what the ultimate integration of the two companies looks like.

	As most people on the call know, we’ve got a very strong position with Nokia that we continue to earn every day and our best hope is that this represents a net improvement in our business outlook as Nokia and Siemens join together.

	But I believe that’s not formally scheduled to close until end of Q1, and at that point we should start to see more visibility unfold. But our view, our hope and our belief right now is it should be net goodness for us.

	With respect to integration, as I had mentioned, the logistics of integration have gone very well. The sales team cross-training and cross-selling is starting to take place now. As we go into ’07 we will create integrated product plans so that we can capitalize on the cool technology that Convedia brings us along with our technology.

	So I would expect as we go through ’07, to start to see some combined offerings between the two companies; such as, taking software media server and putting it on ATCA and bringing their media processing capability into broader product line.

	In addition to it being a very attractive business and opportunity for us, we do want to do integration of their technology and capitalize on the customers that they bring to us. So at this point, after a couple of months looking at it, we’re pretty pleased with integration and outlook.

Operator:	Your next question comes from Matt Petkun with D.A. Davidson & Company.

Matt Petkun:	One thing that always continues to surprise me when you guys report results, is that your operating expenses are below my expectations pretty much every time. What I’m trying to get my hands around this time is the integration, along the same lines as what David was asking, have we seen the full impact of Convedia in your results? Obviously you had lower revenue levels yourselves, so the apples to apples comparison is not exact but have we seen the full impact of Convedia?

Brian Bronson	Yes, you have Matt.

Matt Petkun:	I’m trying to remember where you initially placed Convedia as break even and where you believe it might be now. Obviously it’s integrated but what types of revenue levels will Convedia need to hit to be break even on a pro forma basis?

Brian Bronson	So Matt, so it is dilutive today and what we said is it will be accretive in the second half of 2007. And for it to be accretive it needs to be about $1.5 million of operating income per quarter. And so we won’t go into specific revenue levels but you’ve seen a public filing that gives you historical revenue levels, i.e. what it was the middle of last year and you can project from there.

Scott Grout:	And that second half point of view is the same as when we originally closed the deal.

Brian Bronson:	That’s right.

Matt Petkun:	So you’re not too far away then in reality?

Brian Bronson:	So it’s getting better. It’s still dilutive and revenue needs to grow and particularly IMS deployments need to happen in the second half of the year for it to be accretive.

Matt Petkun:	That’s all I had. Thank you.

Operator:	Your next question comes from Bill Frerichs with Radner Wood Partners.

Bill Frerichs:	Good afternoon. I have a question, and this is a macro question. I’m trying to get a sense of with where you are sticky with your customers. Would you say that maybe fill in the blanks? Say you are extremely sticky with ___ % of your customers, somewhat sticky with ____%, and not sticky with another ____%? In terms of expanded servicesavailable?

Scott Grout:	Inherent in our model of providing embedded systems to our customers is that it is a pretty sticky model for both us and our peers in the industry.

Bill Frerichs:	Once you’ve been designed in?

Scott Grout:	Yes, once you’ve been designed in. So although we’re doing standard-based products, even when the same ATCA system is delivered to two different customers, they’ll use it in two different ways with quite a bit of hand holding. So for both us and our peers it ends up being a pretty sticky model. It’s also pretty normal to be the sole source. It’s a big challenge for them to say, “For the same box we’re going to use two different suppliers for it.”

Bill Frerichs:	So essentially it all depends on the win and then the win is a very highly engineered sale.

Scott Grout:	Yes. Of course, the critical parameter is our own customers’ development cycle and go-to-market cycle. Our revenue ramp is just so strongly dependent on that.

Bill Frerichs:	So the shortfall with Nokia was largely caused by what?

Scott Grout:	Well, we have to be a little bit careful about that. So they clearly fell below their normal run rate in Q4. They had tried to clean up inventory a little bit and get to a target level that probably pushed them down to a level a little bit lower than they normally run.

Bill Frerichs:	Is it fair to say that within Nokia now, generally speaking, the former Nokia folks are running the handset business and the Siemens folks are essentially in charge of the base station business?

Scott Grout:	Here, again, I have to be very careful. Certainly the former is true, that Nokia runs the handset business as that’s an all-Nokia business. In the combination of Nokia and Siemens, the leadership structure will be mixed and combined. The appointed CEO of Nokia Siemens Networks is from Nokia. A number of the executives are from Nokia. A number are from Siemens. So we expect and are seeing a pretty healthy mix.

Bill Frerichs:	So your goodwill will probably persist in the organization.

Scott Grout:	We are working on that, yes.

Operator:	You have a follow up question from David Duley with Merriman.

David Duley:	Just a question on your gross margin guidance for the year. The way the math would work out is, if you’re starting off at 28% or 29% and you’re going to finish off the year in the range that you talked about, then clearly one quarter is going to be above that range or in the 33% and 34% range.

	That’s a range of gross margins I don’t think any of us have seen for a long time. I just was wondering if that’s the way the math works out in your head? Is that all again coming back to the IMS/Convedia ramp really helping these margins and a return of higher levels of volumes?

Brian Bronson:	Yes, so again, Dave, there is a large range of variability, or 30% to 32% and yes, mainly driven off of growth with our media server business, again, based on the timing of deployments with IMS.

David Duley:	In Q3 or Q4 you have to have a 34% margin to hit that, right?

Brian Bronson:	Yes, depending in where we hit within the range, yes that’s correct. That’s how the math would work.

David Duley:	One other thing, a little bit more specific math, your largest customer when you do the math was roughly at $11 million run rate in the quarter. To listen to your guidance statements I noted a roughly $5 million sequential increase, and I thought what you said that this was mainly driven by wireless. And then, what I’m hearing from you is, Nortel returns to normal levels of business. I’m not quite sure what that is anymore, but I think that’s another $4 or $5 million of impact. Does that really imply, when you do that math, that the largest customer’s business is roughly going to double sequentially quarter to quarter?

Scott Grout:	That’s possible, Dave. That’s the way to think about it.

David Duley:	Okay, thank you.

Operator:	Once again, if you would like to ask a question, please press “*” then the number 1 on your telephone keypad.

	You have a follow up question from David Nierenberg with Nierenberg Investment Management Company.

David Nierenberg:	My recollection is that you guys talk about the ATCA order funnel, not on every call but every other call. Is this a call when you can talk about it or isn’t it?

Scott Grout:	It is not. It is next call.

David Nierenberg:	Do you want to talk about it anyway?

Scott Grout:	So I will interject a qualitative statement. 2006 ended as a good year. So I think the last time we talked about the ATCA order funnel was the end of Q3’06. So we booked another quarter and we’re pretty happy with how it came out.

Operator:	At this time there are no further questions.

Scott Grout:	Okay, thank you Melissa and I want to thank everybody for your continued support and look forward to working together in ’07. Thanks.

Operator:	This concludes the RadiSys Quarter 4 Earnings Release conference call. You may now disconnect.