• Our Network Solutions business segment designs, manufactures, sells, installs and services products that help improve the coverage and capacity of wireless networks in buildings and remote areas where these networks may not work properly. This operating segment's net sales in fiscal 2008 were $169.5 million representing 11.6% of our total net sales. Our acquisition of LGC in fiscal 2008 was integrated into this segment.

• Our Professional Services business segment plans, deploys and helps maintain communications networks through the provisioning of integration services for our customers. We also sell many of our products to customers who utilize our professional services. This operating segment's net sales in fiscal 2008 were $181.7 million, representing 12.5% of our total net sales.

We evaluate many financial, operational, and other metrics to evaluate both our financial condition and our financial performance. Below we detail the results of those metrics that we feel are most important in these evaluations:
• Net Sales were approximately $1.5 Billion: Our net sales were approximately $1.5 billion in fiscal 2008, up 14.1% compared to net sales of approximately $1.3 billion in fiscal 2007. Net sales increased 8.9% in our Connectivity business segment. They increased 76.0% in our Network Solutions business segment and they increased 10.7% in our Professional Services business segment.

• Operating Income of $61.7 Million: We generated operating income of $61.7 million in fiscal 2008, compared to operating income of $78.0 million in fiscal 2007. Operating margin was 4.2% of net sales in fiscal 2008, compared to 6.1% of net sales in fiscal 2007.

• Loss from Continuing Operations of ($44.4) Million, or ($0.38) per Share:
We incurred a loss from continuing operations of $44.4 million, or ($0.38) per diluted common share, in fiscal 2008, compared to income from continuing operations of $123.5 million, or $1.04 per diluted common share, in fiscal 2007. The loss from continuing operations in fiscal 2008 was primarily due to an impairment charge of $100.6 million related to auction rate securities and restructuring, impairment and other disposal charges of $29.2 million. The restructuring charges were primarily associated with a restructuring of our operations announced during our fourth quarter of fiscal 2008. Fiscal 2007 results included a $57.1 million gain from the sale of an investment, partially offset by a $29.4 million impairment charge related to auction rate securities.

• Operating Cash Flow of $173.9 Million: We generated operating cash flow from continuing operations of $173.9 million in fiscal 2008, compared to $150.4 million in fiscal 2007.

• Cash and Cash Equivalents of $631.4 Million: As of October 31, 2008 our cash and cash equivalents totaled $631.4 million, which represented an increase of $111.2 million compared to $520.2 million as of October 31, 2007.

We accomplished a number of key initiatives in fiscal 2008 and also faced significant challenges relative to our business.
Accomplishments
• We grew net sales 14.1%, or $179.7 million, in fiscal 2008. Our acquisitions of Century Man and LGC accounted for $127.8 million of our increase in net sales. We believe that our growth rate in fiscal 2008, exclusive of acquisitions, exceeded that of our industry based on data provided publicly by several third parties.

• We continued to experience significant growth in our central office fiber and FTTX product sales in fiscal 2008 as our customers continued to deploy next generation networks. This growth was driven by increases in market share, expansion of our product portfolio, and the overall market growth of this component of the industry.

• During fiscal 2008, we introduced several new products that we believe will help us to address our strategic focus areas of fiber-based and wireless-based networks. For fiber-based networks, these new products include our OmniReachtm Rapid Fiber System, which allows our service provider customers to efficiently deploy next generation services into multi-dwelling units. For wireless-based networks, these new products include our next generation InterReach Fusion in-building wireless coverage and capacity product and FlexWavetm Prism, which provides solutions for outdoor coverage and capacity issues.

• Our acquisition of LGC that was completed in December 2007 transformed our wireless business. By acquiring LGC we have become a global leader in the provision of in-building coverage and capacity solutions. LGC contributed net sales of $97.6 million in fiscal 2008.

• Our acquisition of Century Man that was completed in January 2008 provided us with significant sales channels into China and other Southeast Asian nations, as well as low-cost manufacturing capabilities. Century Man is a leading provider of distribution frames in the Chinese marketplace and contributed $30.2 million of net sales in fiscal 2008.

• We continued to advance our competitive transformation initiative, which we believe has yielded significant cost savings to our operations. The savings generated through this initiative help leverage our operating model and help offset pricing pressures and unfavorable mixes in product sales that can have negative impacts on our operating results.

• We bolstered our liquidity position through the completion of two significant financing transactions. In December 2007 we completed a $450.0 million convertible debt offering. The proceeds of this offering were used in part to repay in full $200.0 million of convertible debt in June 2008. We also put in place a $200.0 million revolving line of credit in April 2008. To date we have not utilized this facility.

• On August 12, 2008 we announced a share buyback program of up to $150.0 million. We completed this program on December 9, 2008. Through this program we acquired 21.3 million shares of our common stock or approximately 18.0% of our outstanding shares.

Challenges
• The downturn in global macro-economic conditions began to impact our business in late fiscal 2008 as customers began to alter their purchasing plans. The severity of the downturn, its length, and its impact on our customers, vendors, and competitors are all very difficult to predict. Our management team is monitoring the business and market environment very closely, but the impacts of the downturn on our business are uncertain.

• Our customers' evolution towards next generation networks over the past several years has impacted the mix of products and services that we sell. For example, we have seen a decline in sales of our copper-based products and wireline products. This has been accompanied by an increase in our sales of fiber-based, FTTX, and structured cable products. This mix shift has negatively impacted our gross margins.

• We continue to face significant pricing pressures from our customers. Many of our largest customers have engaged in large scale acquisition transactions that have given them greater purchasing power with vendors such as us. In addition, in developing markets, customers are often unwilling to pay for products with special features that might reduce the customer's operating costs because the cost of labor in these markets remains low relative to developed markets.

• In October 2008 we implemented a significant restructuring initiative. The initiative included significant reductions in our workforce involving all of our business units, our sales and marketing staff and our general administration and support functions. We also announced our intention to sell our German professional services business and placed this business into discontinued operations. Further, we announced that we were discontinuing certain outdoor wireless coverage products. These actions resulted in a $29.2 million restructuring, impairment and other disposal charges in the fourth quarter of fiscal 2008.

• Like many companies, in fiscal 2008 we faced significant pricing increases for raw materials used to produce our products as well as for transportation costs to move our inventories and products around the world. We were able to pass some of these cost increases along to our customers, but the increased costs did impact our business. Recently the costs for many commodities have been falling and this may result in lower raw material and transportation costs in fiscal 2009.

In order to continue to improve our financial and operational performance and to address the challenges of our industry, we believe we must focus on the following key priorities:
• We will continue to seek business growth in product areas and geographies we consider to be of high strategic importance. These product areas include fiber for central offices, FTTX products and wireless coverage and capacity solutions. The geographies include developing markets like China and India where we expect spending by our customers to increase most significantly in the long-term.

• We intend to realign and focus our sales and marketing activities to sell more of our current portfolio and new products to existing customers and to introduce our products to new customers. For instance, we are realigning many of our internal

sales and marketing activities more around the types of customers we serve (e.g., carriers, enterprise, original equipment manufacturers) instead of around the product sets we sell. We are also looking for ways to better leverage our use of indirect sales channels.

• We will continue to focus on offering our customers price competitive solutions with high functionality and quality as well as world-class customer support. We will continue our competitive transformation initiative to increase our operational efficiency, improve our financial performance and to achieve our goal of becoming a cost leader within the industry.

Results of Operations
The following table shows the percentage change in net sales and expense items from continuing operations for the three fiscal years ended October 31, 2008, 2007, and 2006:

                                                                                                           Percentage
                                                                                                       Increase (Decrease)
                                                                                                         Between Periods
                                      2008                2007                2006            2008 vs. 2007           2007 vs. 2006
                                                      (In millions)
Net sales                           $ 1,456.4        $       1,276.7        $ 1,231.9                   14.1 %                   3.6 %
Cost of sales                           967.1                  834.1            825.6                   15.9                     1.0
Gross profit                            489.3                  442.6            406.3                   10.6                     8.9
Gross margin                             33.6 %                 34.7 %           33.0 %
Operating expenses:
Research and development                 83.5                   69.6             70.9                   20.0                    (1.8 )
Selling and administration              328.9                  287.2            269.6                   14.5                     6.5
Impairment charges                        4.1                    2.3              1.2                   78.3                    91.7
Restructuring charges                    11.1                    5.5             19.4                  101.8                   (71.6 )

Total operating expenses                427.6                  364.6            361.1                   17.3                    (1.0 )

Operating income                         61.7                   78.0             45.2                  (20.9 )                  72.6
Operating margin                          4.2 %                  6.1 %            3.7 %
Other income (expense), net:
Interest income, net                      2.8                   17.0              7.0                  (83.5 )                 142.9
Other, net                             (102.7 )                 31.8              3.4                 (423.0 )                 835.3

Income (loss) before income taxes       (38.2 )                126.8             55.6                 (130.1 )                 128.1
Provision (benefit) for income
taxes                                     6.2                    3.3            (37.7 )                 87.9                  (108.8 )

Income (loss) from continuing
operations                          $   (44.4 )      $         123.5        $    93.3                 (136.0 )%                 32.4 %

The table below sets forth our net sales from continuing operations for fiscal 2008, 2007 and 2006 for each of our three reportable segments described in Item 1 of this Form 10-K.

                                                                                                            Percentage
                                                                                                        Increase (Decrease)
                                                         Net Sales                                        Between Periods
Reportable Segment                     2008                2007                2006            2008 vs. 2007           2007 vs. 2006
                                                       (In millions)
Connectivity                         $ 1,105.2        $       1,014.9        $   980.2                    8.9 %                   3.5 %
Network Solutions
Product                                  145.3                   97.7             97.6                   48.7                     0.1
Service                                   24.2                      -                -                  100.0                       -

Total Network Solutions                  169.5                   97.7             97.6                   73.5                     0.1
Professional Services
Product                                   49.2                   57.6             58.3                  (14.6 )                  (1.2 )
Service                                  132.5                  106.5             95.8                   24.4                    11.2

Total Professional Services              181.7                  164.1            154.1                   10.7                     6.5

Total Net Sales                      $ 1,456.4        $       1,276.7        $ 1,231.9                   14.3 %                   3.6 %

Net Sales
Fiscal 2008 vs. Fiscal 2007
Our net sales growth for fiscal 2008 as compared to fiscal 2007 was primarily driven by our acquisitions and the impact of foreign currency fluctuations versus the U.S. dollar. International net sales were 40.8% and 37.0% of our net sales in fiscal 2008 and fiscal 2007, respectively.
Our Connectivity products' net sales growth in fiscal 2008 as compared to fiscal 2007 was primarily the result of higher sales of global fiber connectivity solutions as customers worldwide are building and deploying fiber network solutions to increase network speed and capacity, as well as an increase in copper connectivity sales in emerging markets. Fiscal 2008 included sales of $30.2 million as a result of the Century Man acquisition that closed during January 2008.
Our Network Solutions net sales growth in fiscal 2008 as compared to fiscal 2007 was primarily due to the acquisition of LGC. LGC is a provider of in-building wireless solution products. The favorable impact of LGC was partially offset by decreasing revenues in traditional high-bit-rate digital subscriber line products, as expected, which have experienced a general industry-wide decline in demand over the last several years. This trend is expected to continue as carriers deliver fiber and Internet Protocol services closer to end-user premises. There was also a decrease in outdoor wireless product revenues due to a transition to next generation products and a decrease in demand from a key customer. Fiscal 2008 included sales of $97.6 million as a result of the LGC acquisition that closed during December 2007. Sales of outdoor, in-building and other wireless products are project based and since we have a relatively concentrated customer base, our sales fluctuate based upon how many projects we obtain and the timing of customer implementations of such projects.
Our Professional Services net sales growth in fiscal 2008 as compared to fiscal 2007 was due to increased demand in the U.S. from a key customer. Fiscal 2007 vs. Fiscal 2006
Our net sales growth for fiscal 2007 as compared to fiscal 2006 was driven by growth in sales of our Connectivity products and the impact of foreign currency fluctuations versus the U.S. dollar. International net sales were 37.0% and 39.1% of our net sales in fiscal 2007 and fiscal 2006, respectively.
Our Connectivity products' net sales growth in fiscal 2007 as compared to fiscal 2006 was driven primarily by an increase in our global fiber sales as customers migrated their spending towards higher density fiber-based solutions, both in central office and outside plant environments. In addition, structured cable sales increased internationally due to enterprise build-outs and upgrades combined with a favorable impact from currency fluctuations. Copper outside plant sales declined due to lower sales of cabinets in Europe, as the projects involving these products that we participated in during fiscal 2006 were completed.
Our Network Solutions products' net sales remained flat in fiscal 2007 compared to fiscal 2006. Net sales of outdoor, in-building and other wireless products increased in fiscal 2007 as compared to fiscal 2006 driven by increased spend levels from a variety of existing customers on our Digivanceฎ product line, but this was offset by decreases in our wireline product sales.
Our Professional Services' net sales increased in fiscal 2007 as compared to fiscal 2006. This increase primarily was due to increased demand for services from a major domestic customer that was expanding its network build programs. Gross Profit
Fiscal 2008 vs. Fiscal 2007
Gross profit percentages were 33.6% and 34.7% during fiscal 2008 and fiscal 2007, respectively. Our 2008 gross profit results included a $10.8 million charge associated with the discontinuance of certain outdoor wireless product families and an additional $3.2 million charge due to a change in the estimate made in fiscal 2007 related to the exit of our automated copper cross-connect ("ACX") product line. Our fiscal 2007 gross profit results included an $8.9 million charge due to the exit activities associated with our ACX product line. Excluding these items, our gross profit decrease mainly was due to higher raw materials and transportation costs, pricing pressure, and negative sales mix, partially offset by cost reductions associated with our competitive transformation initiative. Our future gross margin rate is difficult to predict accurately as the mix of products we sell can vary substantially.
To improve our gross profit percentages and our income from continuing operations, we have taken and will continue to take steps to gain operational efficiencies and lower our cost structure, mainly through our competitive transformation initiative. We believe

these steps are necessary if we are to sustain and improve our operating performance given our highly competitive industry. In taking these steps, we may incur significant restructuring and impairment charges that can temporarily increase our expenses. Further, the timing and actual amount of future benefit we may realize from incurring such charges can be difficult to predict and accurately measure.
Fiscal 2007 vs. Fiscal 2006
Gross profit percentages were 34.7% and 33.0% during fiscal 2007 and fiscal 2006, respectively. The increase in gross profit percentage resulted primarily from our competitive transformation projects, favorable product mix and the impact of foreign currency fluctuations versus the U.S. dollar. This favorable impact was partially offset by $8.9 million of charges related to exit activities associated with our ACX product line. Operating Expenses
Fiscal 2008 vs. Fiscal 2007
Total operating expenses for fiscal 2008 and fiscal 2007 represented 29.4% and 28.6% of net sales, respectively. As discussed below, operating expenses include research and development, selling and administration expenses and restructuring and impairment charges.
Research and development: Research and development expenses for fiscal 2008 and fiscal 2007 represented 5.7% and 5.5% of net sales, respectively. The increase in research and development costs was due to the addition of research and development activities related to our acquisition of LGC. Given the rapidly changing technological and competitive environment in the communications equipment industry, continued commitment to product development efforts will be required for us to remain competitive. Accordingly, we intend to continue to allocate substantial resources, as a percentage of our net sales, to product development. Our internal research and development efforts are focused on those areas where we believe we are most likely to achieve success and on projects that we believe directly advance our strategic aims.
Selling and administration: Selling and administration expenses for fiscal 2008 and fiscal 2007 represented 22.6% and 22.5% of net sales, respectively. The increase of $41.7 million was primarily due to the selling and administration expenses of our acquired companies, LGC and Century Man, including amortization expense of acquired intangible assets. LGC represented $32.0 million of the increase and Century Man represented $7.1 million of the increase.
Restructuring and impairment charges: Restructuring charges relate principally to employee severance and facility consolidation costs resulting from the closure of leased facilities and other workforce reductions attributable to our efforts to reduce costs. During fiscal 2008, 2007 and 2006, we identified and accounted for the elimination of approximately 550, 200 and 400 employees, respectively, through reductions in force. In the current year, the restructuring costs were known in October 2008 and thus taken in fiscal 2008, with the notifications and terminations occurring in early fiscal 2009. The costs of these reductions have been and will be funded through cash from operations. These reductions have impacted each of our reportable segments.
Facility consolidation and lease termination costs represent costs associated with our decision to consolidate and close duplicative or excess manufacturing and office facilities. During fiscal 2008 and 2007, we incurred charges of $0.7 million and $0.8 million, respectively, due to our decision to close unproductive and excess facilities and the continued softening of real estate markets, which resulted in lower sublease income.
In fiscal 2008, we recorded impairment charges of $4.1 million related primarily to the write-off of certain intangible assets related to the exit of some of our outdoor wireless product lines. In fiscal 2007, we recorded impairment charges of $2.3 million related primarily to internally developed capitalized software costs, the exiting of the ACX product line and a commercial property in Germany formerly used by our services business. Fiscal 2007 vs. Fiscal 2006
Total operating expenses for fiscal 2007 and fiscal 2006 represented 28.6% and 29.3% of net sales, respectively. As discussed below, operating expenses include research and development, selling and administration expenses and restructuring and impairment charges.

Research and development: Research and development expenses for fiscal 2007 and fiscal 2006 represented 5.5% and 5.8% of net sales, respectively. Research and development expense decreased slightly as we fully realized the impact of facility consolidation activities completed in fiscal 2006.
Selling and administration: Selling and administration expenses for fiscal 2007 and fiscal 2006 represented 22.5% and 21.9% of net sales, respectively. The increase in selling and administration expenses was primarily due to an increase in incentive compensation expenses and a $10.0 million contribution to the ADC Foundation. The contribution was made from the proceeds of a cash gain from the sale of stock of BigBand Networks, Inc. ("BigBand") earlier in fiscal 2007. This grant was made to help fund the foundation's future operations for several years. The increases to selling and administration expense were offset partially by a $5.7 million decrease in employee retention expenses related to our acquisition of Fiber Optic Network Solutions Corp. ("FONS") that was completed in fiscal 2005. There was no FONS related retention expense in fiscal 2007.
Restructuring and impairment charges: Restructuring charges related principally to employee severance and facility consolidation costs resulting from the closure of leased facilities and other workforce reduction costs attributable to our competitive transformation initiative. During fiscal 2007 and 2006, we terminated the employment of approximately 200 and 400 employees, respectively, through reductions in force. The costs of these reductions have been and will be funded through cash from operations. These reductions have impacted each of our reportable segments.
Facility consolidation and lease termination costs represent costs associated with our decision to consolidate and close duplicative or excess manufacturing and office facilities. During fiscal 2007 and 2006, we incurred charges of $0.8 million and $5.0 million, respectively, due to our decision to close unproductive and excess facilities and the continued softening of real estate markets, which resulted in lower sublease income.
In fiscal 2007, we recorded impairment charges of $2.3 million related primarily to internally developed capitalized software costs, the exiting of the ACX product line and a commercial property in Germany formerly used by our services business. For fiscal 2006, we recorded impairment charges related to . . .