We also provide professional services to our customers. These services help our customers plan, deploy and maintain Internet, data, video and voice communication networks. We also assist our customers in integrating broadband communications equipment used in wireline, wireless, cable and enterprise networks. By providing these services, we have additional opportunities to sell our hardware products.
Our customers consist primarily of long-distance and local communications service providers and private enterprises that operate their own communication networks. In addition, our customers include cable television operators, wireless service providers, new competitive telephone service providers, broadcasters, government agencies, system integrators and communications equipment manufacturers and distributors.
We offer broadband connectivity products, wireless capacity and coverage optimization products, wireline access products and professional services to our customers through the following three reportable business segments:
• Connectivity

• Network Solutions

• Professional Services

During the fourth quarter of fiscal 2008, management initiated a restructuring of the Network Solutions segment by exiting several outdoor wireless product lines. During the first quarter of fiscal 2009, management made further changes to the Network Solutions segment by moving the Wireline solutions business to the Connectivity segment in order to better manage and utilize resources and drive profitability. As a result of this change, we have changed our reportable segments to conform to our current management reporting presentation. We have reclassified prior year segment disclosures to conform to the new segment presentation.
Our Connectivity products connect wireline, wireless, cable, enterprise and broadcast communications networks over copper (twisted pair), coaxial, fiber-optic and wireless media. These products provide the physical interconnections between network components and access points into networks.
Our Network Solutions products help improve coverage and capacity for wireless networks. These products improve signal quality, expand coverage and capacity into expanded geographic areas, increase the speed and expand the delivery and capacity of networks, and help reduce the capital and operating costs of delivering wireless services. Applications for these products include in-building solutions, outdoor coverage solutions and mobile network solutions.
Our Professional Services business provides integration services for broadband and multiservice communications over wireline, wireless, cable and enterprise networks. Our Professional Services business unit helps customers plan, deploy and maintain communications networks that deliver Internet, data, video and voice services.
Marketplace Conditions
Current Global Macro-Economic Conditions The widely reported global recession has had, and likely will continue to have, a significant impact on our industry and our business. During the first two quarters of fiscal 2009 our financial results were impacted materially and adversely by lower than expected spending by our customers. We believe it is likely our customers will continue to spend conservatively throughout our fiscal 2009, and perhaps longer, because of the uncertainties regarding the profitability and growth of their own businesses. For this reason we continue to expect lower revenues in fiscal 2009 as compared to fiscal 2008, but the extent of the expected revenue decline is extremely difficult to predict and is dependent both on the severity of the recession and its length. These expectations therefore could fluctuate significantly and may impact our profitability. During the first two quarters of fiscal 2009, the recession impacted our business specifically in a number of ways. For instance:

• As compared to the three and six months ended May 2, 2008, our net sales decreased by 30.0% and 26.7%, respectively;

• As a result of significant international sales, our net sales have been negatively impacted in recent quarters from the relative strengthening of the U.S. dollar against a majority of other currencies. Changes in foreign currency exchange rates negatively impacted sales in the three and six months ended May 1, 2009 by approximately $8.0 million and $24.0 million, respectively, versus the same periods in fiscal 2008;

• Despite reducing actual expenditures for research and development and selling and administrative costs in the three and six months ended May 1, 2009 compared to the same periods in fiscal 2008, these costs grew as a percentage of our net sales because of lower sales volumes; and

• Our gross margin percentage in the three and six months ended May 1, 2009 was 32.8% and 31.9%, respectively. This compares to 36.0% and 36.3% in the same respective periods in fiscal 2008, primarily because of lower sales volumes.

• We recorded a $413.9 million charge related to the impairment of goodwill and other long-lived assets as a result of our reduced expectations of near-term financial performance.

In response to the adverse impacts on our business caused by the recession, we have taken significant steps to lower our operating cost structure. In the last several months we have announced a series of significant restructuring initiatives that are either completed or are still being executed. These initiatives generally have included facility closures and reductions in our employee base at various locations around the world. These actions were designed to adjust our operations appropriately to lower levels of demand from our customers. We also announced our intention to sell our professional services business in Germany and our plans to discontinue certain outdoor wireless coverage products. Depending on the severity and length of the recession and its impact on our business we may determine it appropriate to take additional actions to reduce costs and improve our business model in the future.
Industry Conditions
Longer term, we continue to believe that the ever-increasing consumption of bandwidth will drive a continued migration to next-generation networks that can deliver reliable broadband services at low, often flat-rate prices over virtually any medium anytime and anywhere. We believe this evolution particularly will impact the "last mile/kilometer" portion of networks where our products and services primarily are used and where constraints in the high-speed delivery of communications services are most likely to occur. For us to participate as fully as possible in this evolution we must focus on the development and sale of next-generation network infrastructure products.
We believe there are two key elements driving the migration to next-generation networks:
• First, businesses and consumers worldwide are becoming increasingly dependent on broadband, multi-service communications networks to conduct a wide range of daily communications tasks for business and personal purposes (e.g., emails with large amounts of data, online gaming, video streaming and photo sharing). This demand for additional broadband services increases the need for broadband network infrastructure products.

• Second, end-users of communications services increasingly expect to do business over a single network connection at a low price. Both public networks operated by communications service providers and private enterprise networks are evolving to provide combinations of Internet, data, video and voice services that can be offered over the same high-speed network connection.

This evolution to next-generation networks impacts our industry significantly. Many of our communications service provider customers have begun to focus their investments in these next-generation networks to differentiate themselves from their competitors by providing more robust services at increasing speeds. They believe such network advancements will attract business and consumer customers and allow them to grow their businesses.
Next-generation network investment by communications service providers has tended to come in the form of large, multi-year projects, and these significant projects have attracted many equipment vendors, including us. We believe that it is important for us to participate in these projects to grow our business and have therefore focused our strategy around the products that help make these projects successful. These include central office fiber-based equipment, wireless coverage and capacity equipment, and equipment to aid the deployment of fiber-based networks closer to the ultimate customer (i.e., fiber to the node, curb, residence, cell site, or business, which we collectively refer to as our "FTTX" products).

Communication service provider spending on these next-generation initiatives has not resulted in significant overall spending increases on all categories of network infrastructure equipment. In fact, spending on network infrastructure equipment in total has increased only modestly in recent years as our customers have reallocated their spending towards new next-generation initiatives and away from their legacy networks. Even prior to the current recession, industry observers anticipated that in the next few years overall global spending on communications infrastructure equipment would be relatively flat. Over the long-term, we therefore believe our ability to compete in the communications equipment marketplace depends in significant part on whether we can continue to develop and market effectively next-generation network infrastructure products. Strategy
Given current economic conditions and our expectations about the marketplace in our industry, we believe we must focus on the following three priorities for us to compete effectively in our industry over the long-term.
First, we must grow our business in areas of strategic importance. This means increasing our business in high growth segments within fiber-based and wireless communications networks with central office fiber, FTTX and wireless coverage and capacity product solutions. We will also focus on rapidly growing geographies, such as developing markets in China, Latin America, Eastern Europe and Russia, the Middle East and Africa, and India. We believe growth in these areas may come either from our own internal initiatives to expand our product offerings through research and development activities, additional sales, marketing and other operating resources, or from the acquisition of new products, sales channels and operations.
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. Our research and development projects have varying risk and reward profiles and we consistently monitor these efforts to ensure that they appropriately balance the potential opportunities against the investments required.
Several of our largest customers have engaged in consolidation to gain greater scale and broaden their service offerings. These consolidations create companies with greater market power which, in recent years, has placed significant pricing pressure on the products we and other equipment vendors sell. To better serve these larger customers, we believe it is appropriate for companies within our industry to consolidate in order to gain greater scale and position themselves to offer a wider array of products and we may engage in such activities. We also continually evaluate and monitor our existing business and product lines for growth and profitability potential and, when we believe appropriate, deemphasize or divest product lines and businesses that we no longer believe can advance our strategic vision or most effectively serve our customers' needs.
Second, we are focused on developing ways to sell more of our current portfolio and our newly developed products to existing customers and to introduce our products to new customers. We have recently reorganized many of our sales and marketing activities around the types of customers we serve (e.g., carriers, enterprise, original equipment manufacturers, etc.). This differs from a historical alignment of our sales and marketing resources that was focused more narrowly on the product sets we sell. We believe this new market-based alignment will enable us to better understand and serve the needs of our customers.
We also continuously seek to partner with other companies as a means to serve the public and private communication network markets and to offer more complete solutions for our customers' needs. Many of our connectivity products in particular are conducive to incorporation by other equipment vendors into systems level solutions. We also believe there are opportunities to sell more of our products through indirect sales channels, including systems integrators and value added resellers. In addition, we are expanding our relationships with distributors that make our products more readily available to a wider base of customers worldwide.
Third, we remain highly committed to creating a compelling value proposition for our customers. This includes helping our customers maximize their return on investment, evolve their networks and simplify network deployment and maintenance challenges. We strive to offer customer-specific solutions, price competitive products with high functionality and quality and world-class customer service and support that collectively will position us to grow our business in a cost-effective manner.
We also continue to implement initiatives as part of an overall program we call "competitive transformation" in order to improve the efficiency of our operations. Among other actions, these initiatives include:

• migrating sales volume to customer-preferred, leading technology products and sunsetting end of life products;

• improving our customers' ordering experience through a faster, simpler, more efficient inquiry-to-invoice process;

• redesigning product lines to gain efficiencies from the use of more common components and improve customization capabilities;

• increasing direct material savings from strategic global sourcing;

• improving cash flow from supplier-managed inventory and lead-time reduction programs;

• relocating certain manufacturing, engineering and other operations from higher-cost geographic areas to lower-cost areas;

• conducting LEAN activities and implementing Six Sigma methodologies;

• reducing the number of locations from which we conduct operations and general and administrative support functions; and

• focusing our resources on core operations and, where appropriate, using third parties to perform non-core processes.

This program has yielded significant cost savings to our operations since fiscal 2006. These savings help generate leverage in our operating model and help to offset pricing pressures and unfavorable mixes in product sales that can have negative impacts on our operating results. Our ability to continue to implement our competitive transformation strategy is subject to numerous risks and uncertainties and no assurance can be given that this strategy will be successful. In addition, our gross profit percentages have and will continue to fluctuate from period to period based on several factors, including, but not limited to, raw material and freight costs, sales volume, product mix and the impact of future potential competitive transformation initiatives.
A more detailed description of the risks to our business can be found in Item 1A of our Annual Report on Form 10-K for the year ended October 31, 2008 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended January 30, 2009.

Results of Operations
Net Sales
   The following table shows net sales and expense items from continuing
operations for the three and six months ended May 1, 2009 and May 2, 2008:

                                                                 Three months ended                        Percentage
                                                            May 1,                May 2,               Increase (Decrease)
                                                             2009                  2008                  Between Periods
                                                                   (In millions)
Net sales                                               $        275.1         $       393.2                     (30.0 )%

Cost of sales                                                    185.0                 251.7                     (26.5 )

Gross profit                                                      90.1                 141.5                     (36.3 )
Gross margin                                                      32.8 %                36.0 %
Operating expenses:
Research and development                                          18.4                  21.8                     (15.6 )
Selling and administration                                        66.1                  84.9                     (22.1 )
Restructuring charges                                              7.3                   1.0                     630.0
Impairment charges                                                 0.7                     -                     100.0

Total operating expenses                                          92.5                 107.7                     (14.1 )

Operating income (loss)                                           (2.4 )                33.8                    (107.1 )
Operating margin                                                  (0.9 )%                8.6 %
Other income (expense), net:
Interest income, net                                              (4.8 )                 0.3                         -
Other, net                                                        (1.0 )               (16.2 )                   (93.8 )

Income (loss) before income taxes                                 (8.2 )                17.9                    (145.8 )
Provision for income taxes                                         1.4                   1.9                     (26.3 )

Income (loss) from continuing operations                $         (9.6 )       $        16.0                    (160.0 )%


                                                                  Six months ended                         Percentage
                                                            May 1,                May 2,               Increase (Decrease)
                                                             2009                  2008                  Between Periods
                                                                   (In millions)
Net sales                                               $        529.4         $       722.3                     (26.7 )%

Cost of sales                                                    360.6                 460.4                     (21.7 )

Gross profit                                                     168.8                 261.9                     (35.5 )
Gross margin                                                      31.9 %                36.3 %
Operating expenses:
Research and development                                          37.4                  41.3                      (9.4 )
Selling and administration                                       138.0                 166.6                     (17.2 )
Restructuring charges                                              7.8                   2.2                     254.5
Impairment charges                                               414.2                     -                     100.0

Total operating expenses                                         597.4                 210.1                     184.3

Operating income (loss)                                         (428.6 )                51.8                    (927.4 )
Operating margin                                                 (81.0 )%                7.2 %
Other income (expense), net:
Interest income, net                                              (9.0 )                 4.6                    (295.7 )
Other, net                                                       (17.1 )               (65.4 )                   (73.9 )

Income (loss) before income taxes                               (454.7 )                (9.0 )                       -
Provision (benefit) for income taxes                              (2.6 )                 3.4                    (176.5 )

Income (loss) from continuing operations                $       (452.1 )       $       (12.4 )                       - %

The following table sets forth our net sales for the three and six months ended May 1, 2009 and May 2, 2008 for each of our reportable segments:

                                                              Three months ended                          Percentage
                                                          May 1,              May 2,                 Increase (Decrease)
Reportable Segment                                         2009                2008                    Between Periods
                                                                (In millions)
Connectivity                                            $     219.1          $   310.4                          (29.4 )%
Network Solutions:
Products                                                       15.6               30.8                          (49.4 )
Services                                                        4.6                4.2                            9.5

Total Network Solutions                                        20.2               35.0                          (42.3 )

Professional Services:
Products                                                        9.8               12.7                          (22.8 )
Services                                                       26.0               35.1                          (25.9 )

Total Professional Services                                    35.8               47.8                          (25.1 )

Total Net Sales                                         $     275.1          $   393.2                          (30.0 )%


                                                               Six months ended                           Percentage
                                                          May 1,              May 2,                 Increase (Decrease)
Reportable Segment                                         2009                2008                    Between Periods
                                                                (In millions)
Connectivity                                            $     417.3          $   567.9                          (26.5 )%
Network Solutions:
Products                                                       31.7               54.1                          (41.4 )
Services                                                        8.8                9.7                           (9.3 )

Total Network Solutions                                        40.5               63.8                          (36.5 )

Professional Services:
Products                                                       19.3               24.8                          (22.2 )
Services                                                       52.3               65.8                          (20.5 )

Total Professional Services                                    71.6               90.6                          (21.0 )

Total Net Sales                                         $     529.4          $   722.3                          (26.7 )%

Our net sales decreases for the three and six months ended May 1, 2009 compared to the three and six months ended May 2, 2008 were driven by sales declines in all reporting segments. These decreases were due to the general downturn of the global economy, which increased in severity and extended across a majority of our geographies in the first two quarters of fiscal 2009. The current economic environment has driven customers to spend significantly less than they did in the first two quarters of fiscal 2008.
International sales comprised 39.9% and 41.3% of our net sales for the three and six months ended May 1, 2009, respectively. This compares to 40.3% and 40.4% for the three and six months ended May 2, 2008, respectively. As a result of significant international sales, our net sales have been negatively impacted in recent quarters from the relative strengthening of the U.S. dollar against a majority of other currencies. Changes in foreign currency exchange rates negatively impacted sales in the three and six months ended May 1, 2009 by approximately $8.0 million and $24.0 million, respectively, versus the same periods in fiscal 2008.
The three and six months ended May 1, 2009 included sales in Connectivity of $22.9 million and $38.2 million, respectively, as a result of the Century Man acquisition that closed during January 2008. This compares to $8.1 million and $9.6 million for the three and six months ended May 2, 2008, respectively. This increase was due to the inclusion of Century Man in our results for the full first quarter of fiscal 2009 and increased demand due largely to the Chinese government economic stimulus package and issuance of 3G wireless licenses.
The decrease in Network Solutions sales was driven, in part, by our decision to shutdown certain outdoor wireless product lines in the fourth quarter of fiscal 2008 as well as by significant declines in sales outside of North America that we believe are the result of the global recession. Gross Margin
During the three and six months ended May 1, 2009, our gross margin percentages were 32.8% and 31.9%, respectively, compared to 36.0% and 36.3%, respectively, for the comparable 2008 periods.
The decrease in gross margins was primarily driven by the decrease in sales volume, partially offset by our cost reduction initiatives. The mix of products we sell can vary substantially. If sales volumes, product mix, pricing or other significant factors that impact our gross margins continue to be affected by the economic downturn, our gross margins could continue to be adversely affected. As a result, our future gross margin rate is difficult to predict with precision. Operating Expenses . . .