David Calusdian – IR, Sharon Merrill Associates Tom Reslewic – President and CEO Sean O'Connor – VP of Finance, CFO, Secretary and Treasurer

John Harmon – Needham & Co. Raj Seth – Cowen & Co.

Swen Ingmar [ph] – Thomas Weisel Partners Mike Crawford – Riley Investment Management

Good morning, everyone, and welcome. In connection with this conference call, LeCroy wishes to take advantage of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 with respect to statements that may be deemed to be forward-looking under the Act.

All such forward-looking statements are only estimates of future results and there can be no assurance that actual results will not differ materially from those expectations. Information on all of the potential factors that could affect LeCroy Corporation's business are described in the company's reports on file with the Securities and Exchange Commission.

Any forward-looking statements only represent the company's views as of today, August 6, 2008. While LeCroy may choose to update these forward-looking statements at a later date, the company specifically disclaims any duty to do so.

On the call with me this morning are LeCroy's President and Chief Executive Officer, Tom Reslewic, and Vice President and Chief Financial Officer, Sean O'Connor. I will now turn the call over to Tom.

Tom?

Thank you, David, and good morning, everyone. We're glad to have you with us this morning.

Today I'll provide you with the financial and operating highlights for the fourth quarter and for fiscal 2008 and I'll also outline some initiatives to reignite growth in our Protocol Solutions business. Then Sean will take you through the detailed financials and after that I'll return with some color on the order trends, a progress report on our new product pipeline, and our guidance for fiscal year 2009.

We reported a solid fourth quarter, which capped a successful fiscal 2008 from both the financial and strategic perspectives. On the financial side, as a result of our fourth quarter performance, we finished just above the midrange of our revenue guidance and at the high end of our operating income guidance for the year.

Here's some income statement highlights. Total sales grew 10.5% year-on-year to $40.7 million for the quarter.

For the year, sales grew 6% to $160.5 million. Our revenue growth was primarily driven by oscilloscope sales, which we attribute to our major distribution channel realignment efforts.

Our overall adjusted gross margin increased 150 basis points to 59.4%, compared with 57.9% in the fourth quarter, a year ago. On a sequential basis, our gross margin improved by 110 basis points from 58.3% last quarter.

Now this is particularly impressive, since we moved a significant volume of older products during the fourth quarter in advance of our launch of the new WavePro 7, which took place at the beginning of Q1. As I'm sure you remember, in addition to improving our oscilloscope channel performance, we also took steps to streamline the business and reduced our costs.

These efforts, together with improved sales, led to a strong performance on the bottom-line as well. Our adjusted operating income for the quarter climbed almost 60% to $3.9 million and for the year, operating income increased 67% to $16.1 million for a full-year operating margin of 10%.

This translates into adjusted EPS of $0.24 for the quarter and $0.78 for the full year of 2008, compared to $0.12 and $0.29, respectively, last year. So we're very pleased with our top and bottom-line performance for the quarter and for the year.

Some balance sheet highlights. We have also significantly improved our balance sheet throughout the year.

We've generated about $5 million in cash from operations for the quarter and $22 million for the year, which is a record for the company. We reduced our net debt by $3.1 million during the quarter and we're particularly pleased with our success at reducing the net debt for the year.

To give you some perspective, at the end of fiscal 2007 we had $72 million in convertible debt, $9.4 million in bank debt and $3.5 million in other debt related to the Catalyst acquisition. By the end of fiscal 2008, we had eliminated the $9.4 million bank debt, the $3.5 million other debt and we've also reduced our convertible debt by $4.5 million.

As a result, we reduced our net debt from $74.5 million to $57.3 million. We've also used our cash to buy back about 300,000 shares of common stock for $2.4 million earlier in the year.

Since our convertible bonds were trading at a discount, in the second half of the year, we turned our attention and resources to lowering our convertible debt. We repurchased about $4 million of our convertible debt for about $4 million, roughly a 10% discount.

We intend to continue with this strategy to further reduce our debt. I'll now give a quick word on the Oscilloscope growth and then I'll talk about some Protocol initiatives.

To understand our oscilloscope performance in the fourth quarter, you need to look back at the plan we established a little more than a year ago to overhaul our organization. Our goal was to realign our operations in order to improve channel effectiveness, and at the same time, move a series of groundbreaking new products through the pipeline.

Our improved channel effectiveness and our lean cost structure have delivered results above our expectations for the year, resulting in solid sales growth and significantly improved product margins, compared to a year ago. Keep in mind that this has been accomplished in advance of new products and in a year during which our competitor did launch major products.

Now, with a proven channel strategy in place, a favorable margin structure, and with the first of our new products successfully delivered to the market, we have reason to be optimistic about the future of our Scope business. Later in the call I'll provide some more color on the scope business, as well as some early feedback on our new products.

Now, the excellent performance of our business this year was achieved despite slower than expected growth from our Protocol business. Basically, our growth strategy in Protocol has involved aggressive product development and a precise set of target markets, which have evolving Protocol test needs.

Each choice consumes significant development resources, so it's important that we choose our targets correctly and that the market adoption of the new Protocols proceeds at a reasonably steady pace. If we over-invest in a segment or if one or more market segments develop too slowly, then we run the risk of experiencing slower growth and essentially, this has been our situation for a good part of fiscal 2008.

When we acquired Catalyst in October of 2006, we purposefully maintained a dual product structure in both PCI Express and the Storage Market segments. We did this to make sure that we could satisfy both sets of end users until the best features of both product lines could be merged into a single offering.

Now, while this provided the revenue protection we wanted, it's been expensive and sometimes confusing to maintain two separate product development efforts in each of these segments. Furthermore, the pace of adoption in certain of our target segments has been far slower than we had initially anticipated.

While we have recently identified several new targets of opportunity, our dual product line investments have made it difficult to apply enough resources to these new opportunity areas. So, therefore, we've taken some significant steps to change our investment profile and to aim considerable resources at some new targets of opportunity.

First, we've developed a next generation product architecture, which supports the best features of the LeCroy and Catalyst product lines. This will allow us to streamline our product offering and to provide our customers with the best of both worlds.

We've already started to divert resources consumed by the dual product line structure into new target market initiatives. While the announcement of new target segments and products is still premature, we're in late-stage beta test in one of these new segments and expect to be able to make product announcements within a couple of months.

So what's the impact of these moves? While we've made the decision to eliminate the Catalyst brand name and we've taken a non-cash asset impairment charge for that, also we've discontinued several products and have taken additional non-cash charges for excess inventory in those product lines.

Altogether we've incurred $3.1 million of non-cash charges in the fourth quarter, which will free up significant resources to aim our Protocol Solutions group at some exciting new opportunities. And remember, the Protocol line is extremely profitable and we remain the market leader across our various Protocol segments and even though some of these segments are evolving more slowly than expected, we believe that they are well on their road to adoption and to the increased deployment of our Protocol Test Tools.

We completed major construction and overhaul projects in the Scope business in 2008 and we think this is the right time to get our Protocol business primed for growth as we enter fiscal 2009. Now I'll turn the call over to Sean and he'll give you a detailed review of the numbers.

Afterwards, I'll talk a little bit more about the order trends and our outlook for fiscal 2009. Sean?

Thank you, Tom, and good morning, everyone. In my discussion, I'll occasionally be referring to adjusted non-GAAP operating results.

We use non-GAAP results as a supplement to our results based upon GAAP, because we believe this provides additional insight into the underlying results and can enhance the understanding of the company's ongoing business. The press release we issued this morning contains a reconciliation of the non-GAAP results to the most closely related GAAP results.

The non-GAAP adjustments in the fourth quarter include the following special charges. First, a non-cash share-based compensation expense of approximately $981,000; second, a strategic realignment charge of $3.1 million for the Protocol family products, consisting of a $2.4 million non-cash inventory write-down; and $699,000 impairment of an intangible asset.

And last, $57,000 of incremental cost of sales related to the purchase accounting fair value step-up adjustment for Catalyst inventory that we sold in Q4. With that, let's turn to the fourth quarter results.

Revenues for the fourth quarter increased 10.5% to $40.7 million from $36.8 million in the year earlier quarter and was up slightly from the sequential third quarter. Our cost of sales in the fourth quarter was $19.1 million.

This includes special items of, first, the $2.4 million write-down for Protocol inventory; second, $57,000 for purchase accounting fair value adjustment for inventory sold in Q4; and third, $45,000 for share-based compensation charges. Excluding those items, non-GAAP gross margin for the fourth quarter was 59.4%, compared with 57.9% for non-GAAP gross margin in the same period last year.

Gross margins are up 150 points from the year earlier, primarily due to higher product ASPs and higher unit volume as well as associated cost reduction efforts and manufacturing efficiencies. Total operating expenses for the fourth quarter was approximately $21.9 million.

This included, first, $936,000 of non-cash share-based compensation charges, of which $561,000 was charged to SG&A and $375,000 was charged to R&D. And second, approximately $699,000 of a non-cash intangible asset write-down expense, which was charged to SG&A.

Excluding these items, non-GAAP R&D expense was $8 million, or 19.7% of revenues. This was higher than the R&D expense of $7 million, or 19.1% of revenues for Q4 of last year.

Excluding the items I just mentioned, non-GAAP SG&A expense in the fourth quarter was $12.2 million, or 30% of revenues, which compares with $11.8 million, or 32.1% of revenues in the same period last year. The decrease in our SG&A expense ratio was primarily due to the benefits we derived from cost-cutting and business realignment efforts last year.

Turning to operating income, on a GAAP basis, including the realignment write-down and other charges I noted previously, we generated a fourth quarter loss of $271,000, compared with the $1.9 million loss of Q4 of last year. Excluding our special items, our Q4 2008 non-GAAP operating income was $3.9 million, or 9.6% non-GAAP operating margin.

And this compares with $2.5 million or 6.7% non-GAAP operating margin in the fourth quarter of last year. Other expense was $774,000 for the fourth quarter.

This consisted primarily of net interest expense of $1.1 million, offset by $338,000 gain on extinguishment of the company's convertible debt. The company repurchased $4.5 million of convertible bonds at a discount of approximately 10%.

However, that gain was reduced by $130,000 for the pro rata write-off of un-amortized bond issuance costs. In the corresponding quarter last year, we reported other expense of $1.1 million, again, primarily net interest expense.

Our effective tax rate on a GAAP basis for the fourth quarter was approximately 22% and this compares with 25% in the same period last year. The lower tax rate in Q4 of this year is the result of the company's geographic earnings mix, as well as a discrete fourth quarter foreign tax benefit.

Excluding the impact of FAS 123R share-based compensation expense, the full-year normalized tax rate was approximately 31%, compared with 35.5% in the year-ago period. For the fourth quarter of 2008 we recorded a GAAP net loss of $810,000, or $0.07 per share.

This includes the after-tax effects of the realignment write-downs and non-cash charges noted previously. Excluding those charges, our non-GAAP net income was $2.9 million, or $0.24 per diluted share.

This compares with non-GAAP net income of $1.4 million or $0.12 in the same period last year. The number of shares outstanding used to compute to the fourth quarter GAAP EPS was $11.7 million – 11.7 million shares, excuse me.

This compares with 11.6 million diluted shares outstanding in the last period last year. Now, turning to our balance sheet, as Tom mentioned we are pleased with our accomplishments on our balance sheet.

Our cash position was approximately $10.2 million at quarter-end, which is comparable to last year's balance. However, during this past year, we fully paid down $9.4 million of bank debt, $3.5 million of Catalyst acquisition debt and in the current quarter we initiated the repurchase of convertible notes, retiring $4.5 million of convertible bonds.

Also during the quarter, we repurchased approximately 35,000 shares of company stock, paying approximately $286,000 at an average price of $8.12 per share. For the fiscal year, we repurchased approximately 298,000 shares of common stock, paying approximately $2.4 million, at an average price of $8.11 per share.

Our Q4 net accounts receivable balance increased to $33.3 million compared to a prior year-end of $31.9 million. Inventory decreased by approximately $1.3 million during the quarter to $32.9 million, primarily due to the Protocol inventory write-down previously discussed, offset by material purchases for the New WavePro 7 product launch.

Year-on-year, our inventory is down $5.8 million. Next, some comments on cash.

As a result of the company's continued focus on working capital, we have generated a record cash from operations in fiscal 2008. We generated approximately $22 million of cash from operations for the fiscal year, with $4.9 million coming from Q4.

With strong operating and free cash flow, we were able to repurchase $4.5 million of convertible notes, as I just mentioned, and at the end of Q4, the company has no bank debt. Capital expenditures for the fourth quarter were approximately $2.2 million and $4.5 million for the fiscal year.

The company currently has 455 employees; about 65% are in the USA, 20% in Europe and 15% in Asia-Pacific. Our annualized revenue per employee was $353,000 in the fourth quarter of 2008, up from $342,000 a year ago.

So, to sum up, as Tom mentioned, we are pleased with our fiscal '08 results, which gives us confidence in our prospects for fiscal '09. Today, the company is in a much stronger competitive position than one year ago.

With our first major product launch, with the Apollo chipset underway and aggressive roll-out of new products, we expect to deliver continuing growth in operating cash flow. We believe the company is well-positioned to offer our customers increasingly compelling products that will drive growth and increase shareholder value.

I'll now turn the call back to Tom.

Okay, thank you, Sean. I'd like to take you through some of the order trends that we saw in the quarter.

Geographically, we saw the Americas continue a strong trend, as we experienced about a 10% increase in orders compared to the fourth quarter a year ago. Europe had double-digit increase in orders once again, which continues to be somewhat driven by the strength of the Euro.

Total Asia orders were up nearly 30% compared to a year ago; orders from Japan were up significantly on a sequential basis, but are still down from a year ago and our performance in Japan continues to reflect some market softness. In terms of market segments, the Computer, Semiconductor, and Consumer Electronics segment remains our largest component of our business and is steady at about 33% of total, which is about the same as it was last quarter.

The Automotive segment, at 20% of total, was a little lower than Q3, while Data Storage was strong and up to 20% of our total business compared to the third quarter. So the Scope business has really led our strong performance for 2008.

Our channel effectiveness is in good shape and the new Oscilloscope products are starting to roll-out of the pipeline. Overall, we saw improved order linearity from last quarter, as we booked 59.8% of our orders in the first nine weeks of the quarter and this compares to our target of 61%.

We also like to look at early orders from the new quarter as a measure of the underlying strength of the order trends. So, improving linearity usually predicts strong starts and it's true that our first quarter is off to a very strong start for orders.

In fact, after three weeks of July, we're 36% ahead of orders from the first three weeks of April and almost twice the level of orders from the first three weeks of July a year ago. Even our shipment linearity looks good as we start this quarter, we've exceeded our internal goals for the month of July and shipments seem to be off to a pretty good start.

I'd like to talk a little bit about the WavePro 7. We launched the all-new WavePro 7 series on the first day of the new fiscal year, July 1, and this exciting new scope is the first deployment of our next-generation Apollo chipset.

The WavePro 7 embodies the spirit that propelled LeCroy to enter the scope market nearly 20 years ago when there were almost 20 players to compete with. The WavePro 7 delivers outstanding performance specifications, with a long list of innovative industry firsts.

And while the specific list of items would probably bore the financial community, the trade press have given extensive coverage to the new product and have praised it for its performance, its cutting edge industrial design, and its long list of unusual and innovative features. I'm really proud of the design team and the marketing team and the operations teams for delivering such an excellent product to the salesforce and what so far seems to be among the smoothest product launches in our history.

The salesforce is fully trained and very excited. Initial demos are deployed, a second wave of demo instruments is flowing to the field and we're generally on track to hit our production and shipping targets for the quarter.

The customer response has been excellent and initial orders are also ahead of our internal targets and the WavePro 7 is just the beginning. We expect to push products through the new product pipeline for the rest of this fiscal year and into next year as well.

So, on that high note, let's shift to the outlook for the upcoming year. While we're obviously excited about the way we executed and finished fiscal 2008 and about the fact that we're starting the new year with so many new products coming out the pipeline.

Still we want to be careful with our outlook and take into consideration a number of important factors. First, our capacity for WavePro shipments in the first quarter is limited and we won't start shipping the first customer units until early September.

In addition, our Protocol group is in a similar new product cycle in the first quarter, which further tempers our summer quarter outlook, and both of these points to the fact that our first quarter is always seasonally slow and you can see that we need to be conservative with our first quarter expectations. So we've moderated our full-year outlook based on our belief that overall shipments in the first fiscal quarter will be much lower than in subsequent quarters.

Secondly, we remain on the outlook for signs of weakness in our demand environment. Until now, we've not seen any softness in our business, but each day contains more news and data points that tend to make us cautious with our outlook and with our spending plans.

And finally, we'll be embarking on several new market initiatives in our Protocol Solutions group this year and we need to be careful not to underestimate the execution and market risks associated with these plans. Still, despite a few good reasons for conservatism, we are projecting a record year for LeCroy in fiscal 2009, with revenues in the range of $167 million to $173 million and operating income in the range of $17.5 million to $18.5 million.

We plan to monitor our market and execution risks very carefully in the first quarter and, of course, we hope that we might catch a tailwind somewhere before the end of calendar 2008 and we will update you on our annual outlook at the end of each quarter. And with that, Sean and I are now happy to take your questions.

Hi, good morning.

Good morning, John.

Good morning, John.

Well, Thomas, I could maybe beg you for some of those technical details about your new oscilloscope line that bore those of us in the financial community and I certainly realize there's always this constant leapfrog going on in terms of specs. But does your new Apollo chipset bring you up to par with your competitors, puts you ahead for a while?

What is the best attribute or a couple of best attributes about the chipset?

Well, so, I think that we'll isolate and kind of confine our remarks to the WavePro product line, which has just been launched. Of course, the Apollo Chipset is a variety of broad series of chips that will support not just the WavePro, but also subsequent product launches as well.

So I'll stay away from the stuff that's coming next in the pipeline and confine to the WavePro. So, from a specification perspective, the WavePro line lives between 1.0 and 6.0 GHz of analog bandwidth, and in that regard, boasts specs that are equal to our superior to the competitive products in all of those areas.

Of course, all the competitors in the market have scopes up to 6.0 GHz, so there's no particular bandwidth breakthrough in the WavePro product line. But I think what is very interesting about the product are some of the features that make it such a superior tool for our customers that are engaged in, particularly, debug and analysis activities.

Now, first of all, typically oscilloscopes, once you get into high end scopes, you usually give up a lot of general purpose features, like the ability to use lower-end probes to do some basic troubleshooting around your boards. And that means that users of high bandwidth scopes are often reaching for their lower-end, general purpose scope in tandem to do some basic things on their boards.

The WavePro is the first product to provide a complete dual set of front-end connectors that let customers not only do all the high end work they need to do, but quickly reach into their circuit and evaluate things that, at lower speed, that they would normally have to reach for a second product for. Display attributes are very unique in the industry – the biggest, brightest, the highest resolution display, more things on that display, in fact, the only oscilloscope that offers an integrated second display with full touch screen and additional keypad capability for really versatile display of waveforms and so forth.

And probably a thing that grabs our customers the most when they see it is the absolute speed and responsiveness of the instrument. In fact, it's so much faster than our old products or any of the competitor products that the initial demos are very, very compelling to customers.

So there's a kind of a quick snapshot of some of the things that make the product unique. But the product is very well written up by the trade press, with lots more details.

No, that helps a lot, thank you. And regarding the Protocol business, at one point you weren't seeing the kind of sales that you'd wanted, because you had merged the Oscilloscope and the Protocol salesforces.

But I just want to clarify that those have been unraveled and it sounded like the changes you wanted to make were more product or technology-based.

Yes. In fact, see the challenge that we had with the salesforces being merged was not really Protocol revenue.

It was far more a distraction on the Scope channel. So it was getting the focus back on the Scopes that we did, now a little over a year ago, that has really helped to propel our distribution strategy on Scopes to help us so much in the year.

On the Protocol side, first of all, that is a very profitable and well run business. It's a market share leader in every segment that it participates in.

So the thing that really impacts our growth there is the underlying progress being made in the segments that we're serving, in terms of the adoption rates and the evolution of standards like PCI Express and the Storage standard, like SAS and SATA, and of course up and coming things like UWB and Wireless USC. And I think that the pace of rollout of the new silicon and the new standards and the adoption has been slower than we like and it's impacting our growth and so, as the leader in the market and running a very profitable business, we've got some choices, particularly with regard to other segments that we want to target, and to do that, we really need to be able to pull back some of the double investments that we've been making in product lines where all the overlap resided between us and Catalyst when we made that acquisition.

And that's really what the Protocol initiative is all about, giving us a chance to free up some investments, aim at some new and interesting segments of opportunity and see if we can get the growth engine out there reignited.

One more if I may. I'm not really trying to get you to reveal your product pipeline, but at this point in time, what are the new Protocols, do you think are going to be the biggest opportunities for you?

Well, I think probably at least one that I can mention that's right on the horizon for us is certainly moving rapidly and it's really definitely a LeCroy protocol to win and that's USB 3.0, which has a nice speed bump up compared to the existing 2.0 standard. And it's very attractive, because it'll really drive not only the chip guides but the motherboard and lots of peripherals and wide deployment like USB has.

So we've really got a lot of energy on that. And then there are a couple of things that are new and different and I think it would be – it's a little bit premature for us to talk about what they are.

But I will tell you the product development cycle in that business is so much shorter than the scope business that it won't be too long before we'll be able to tell you what we're doing in some of these new areas.

Great. Thank you very much.

Sure.

Hi. Thanks.

Tom, you mentioned some anticipated seasonal weakness in the first quarter, in addition to being a little cautious given some of the transitions. I wonder if you could put a little bit more color on your expectations in Q1, maybe on an operating margin basis or anything else you can give us beyond that high level commentary to help us with our models and so forth?

Right. Sure.

I think that the way I would look at Q1 is I'd look at Q1 as being not materially different than – we run about three quarters almost identical. Q2, 3 and 4 of fiscal '08 are almost carbon copies of each other, in terms of revenue, operating margins and so forth.

I would say that, that basic level that we're on really kind of defines where we'll stay for another quarter and maybe that even slightly moderated downward just a touch, just because of the seasonality. So, I think that there's some natural seasonality.

I think the book-to-bill is going to be great and I think there's no doubt about that and I think that will be one of the things that will help us bump up in the subsequent quarters. But I think that the real issue is this WavePro is very captivating.

It's really got the salesforce humming along at a really great note and I think the issue for us is we won't get the first ones shipped to customers until September. Now, that was a big decision for us to make to decide what the mix was going to be between instruments that we deploy as demonstrators or instruments that we allow to get out the door for revenue.

And we, I have to say, we made the decision to push more towards the demonstrators and get the demonstrator instruments out early. We're going to have a really large number of demo units.

We think that the story is exciting and that the channel is primed and we think our channel capacity is excellent. So we want to capitalize on all of those things to drive the interest in the market and to do that, we're going to sacrifice the number of units that we're going to be able to ship in really the last three weeks of September or so.

And so I think that, that plus a similar new product cycle on the Protocol side, are kind of the internal factors and then of course it's just the normal summer time, the seasonality that we naturally face. So I think you should be thinking in terms of another quarter that's not that different from where we've been for the last three, which is still solid $40 million-ish quarters with reasonable operating margins.

But I think that thereafter things will start to – if you look at our full year guidance and you kind of see that thereafter things pump up, I think you get a sensation of how we're thinking about things.

Great, a couple of follow-ups. What were orders in the quarter?

Perhaps you mentioned that. I missed that.

Yes – no, I didn't mention orders in the quarter and we really have not been reporting the actual number of orders, dollars of orders for the last several quarters. But I will say that they were brisk and that they were ahead of chips.

Okay and then gross margin expectations, you finish out this year in almost 60%, 59.5% –

Yes.

How should we think about your expectations, given mix and some of the other things going on? Gross margins should –

Yes (inaudible) our target is to get back into the 60% to 65% range. I still think it's another quarter or two before we cross the boundary, cross the 60% border, but I would expect that to occur, certainly, by the time we get to midyear.

Okay and tax rate, same sort of 32%, is that the way to think about it?

That's right, Raj.

Okay. Thanks.

That's helpful.

Yes, hi, this is Swen Ingmar [ph]. I'm calling in for Ajit.

I have a couple of quick questions. First one, wanted to ask in terms of the product mix in the current quarter – or what were the growth rates in the current quarter in terms of Oscilloscopes and Protocol Solutions?

Yes. As you know, we don't specifically break those two product lines out, because of the synergies between the overall business.

But I can tell you, just from kind of a comparable growth perspective, the year-on-year, so Q4 to Q4 growth in the Scopes business was close to 14% and we were pretty much just slightly ahead of flat in the Protocol business, so kind of a turnaround. The Scope business really drove the growth in the fourth quarter.

Protocol sitting, as I mentioned it earlier, a little flattish and we want to try to do something about that. And it's important to note the Protocol business typically, that product line has a much higher gross margin, generally, so to see the overall margins improve when the mix shift in favor of the Scope business is a little counterintuitive.

And I think that really points to some of the underlying strength that we've been starting to build in the Scope business, particularly in our midrange product lines where we've been, we had a very strong quarter and very good margin performance as well.

And now, in terms of the next year, when you think about your product mix, what are you targeting, in terms of Oscilloscope versus Protocol Solution side? I think historically you've been talking about 80-20 mix.

Yes. I think, generally, whether its 80-20, 75-25, somewhere in there, I think that's generally about right.

And then when you think about the mix there evolving, do you see – is there going to be – and when we model our quarterly numbers, do you see certain kind of slowdown in the Protocol Solutions side in the first couple of quarters with ramp thereafter? Or how should we think about that side of the business?

I think that it'll probably be another quarter or two of somewhat steady as it is in Protocol, but I think that a lot of this will depend on the success of our ability to launch and penetrate some new segments. So our expectation is certainly by the time we get into midyear we'll start to have a couple of those solutions deployed and from there we'll see.

But hopefully some of the new initiatives will start to drive our business back into some stronger growth as we turn the corner in midyear.

Great. Thank you.

Thanks. For next year, could you walk through just a couple of the GAAP and non-GAAP assumptions for us?

Like, first of all, like for example GAAP, non-GAAP and cash tax rate expected?

Mike, the GAAP rate will be a little bit higher than the 32% tax rate we predict for non-GAAP, simply because we have ISOs, stock competition expense that don't have any certain tax benefits. So that could be two points higher on the GAAP versus non-GAAP.

Cash from operations, we expect to build upon the current year. It could be 5% to 10% higher in terms of cash from operations.

So there's really no distinction between GAAP and non-GAAP on that format and going forward, we don't have any plans for any particular adjustments for non-GAAP other than stock-based compensation expense. So that would be the only item and that runs about $1 million a quarter.

Okay and just on the inventory write-downs, none of these were for the old WavePro? These were all for Catalyst branded products for the most part?

Actually, 100% of the inventory action was on the Protocol line, so one of the things that we've done is we have not discontinued the old WavePro. In fact, the old WavePro is a steady performing product and it's integrated into a lot of systems and a lot of customers' labs, particularly some of our data storage customers that have relied on the WavePro for many years.

So the WavePro 7,000 series products are – will still continue to live. They'll come down in volume, of course, but we'll continue to supply them to customers like data storage guys who need them.

So, as a result, there was no inventory impact there and we don't expect one. That transition's managed rather smoothly.

All of the inventory really related to products that were the overlap products when we acquired Catalyst. In fact, you could imagine that these delay-in-actions were things – if we had not kept the dual product structure, these are things we might have done right at the acquisition.

So you could really look at it kind of a delayed reaction to what we might have done on acquisition day, reflecting the fact that we wanted to make sure we kept all the customers in the boat for a couple years until we could really migrate the products to everyone's satisfaction.

Okay, so just kind of taking that a step further. One of the potential concerns has been that, with the new WavePro 7 offering all these greater features and what not that you might get caught with some older product in the channel, or whatever, that would need to be reduced.

But that's clearly not happening, in your opinion, at this point?

It's not. We don't believe it to be an issue at all.

Great. Thank you.

Yes.

Okay, great. So thanks, operator, and thanks everyone for listening and we look forward to speaking with you all again when we announce our first quarter results in mid-October.

Thank you again.