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Executives

Glynis Bryan – Chief Financial Officer

Rich Fennessy – President and Chief Executive Officer

Mark McGrath - President North America and APAC

Analysts

Brian Alexander - Raymond James

Matthew Sheerin - Thomas Weisel Partners

John Lawrence - Morgan Keegan

Insight Enterprises Inc. (NSIT) Q2 2008 Earnings Call August 11, 2008 5:00 PM ET

Operator

Good day and welcome to the Second Quarter 2008 Insight Enterprises Incorporated Earnings Conference Call. My name is Candice and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session after managements remarks (Operator Instructions).

I would now like to turn the presentation over to your host for today’s conference Ms. Glynis Bryan, Chief Financial Officer. You may proceed.

Glynis Bryan – Chief Financial Officer

Welcome everyone and thank you for joining the Insight Enterprises conference call. Today, we will be discussing the Company's operating results for the quarter ended June 30, 2008. I'm Glynis Bryan, Chief Financial Officer of Insight Enterprises. And joining me is Rich Fennessy, President and Chief Executive Officer; and Mark McGrath, President North America and Asia Pacific.

If you do not have a copy of the earnings release that was posted this afternoon and filed with the Securities and Exchange Commission on Form 8-K, you will find it on our website at insight.com under Investor Relations section.

Todays call and answer is being webcast live and can be accessed by the investor relation section of our website at Insight.com. An archive copy of the conference call will be available approximately two hours after completion of the call and will remain on our website for limited time. This conference call and the associated webcast contained time sensitive material that is accurate only as of today August 11, 2008. This call is the property of Insight Enterprises. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Insight Enterprises is strictly prohibited.

Also, please note that during todays conference call management will refer to certain non-GAAP financial measures when discussing the second quarter financial results. Specifically, these non-GAAP financial measures will exclude the total impairment charge taken during the quarter and the tax effect of this item. A reconciliation of non-GAAP measures would include in the earnings release we issued today and will also be posted on the investor relations section of our website.

Finally, let me remind you about forward-looking statements that will be made on today's call. All forward-looking statements that are made in this conference call are subject to risks and uncertainties that could cause the actual results to differ materially. These risks are discussed in today's earnings release and in greater detail in our annual report on Form 10-K for the year ended December 31, 2007. Insight Enterprises assumes no obligation to update any forward looking statement.

With that, I will now turn the call over to Rich for opening remarks. Rich?

Rich Fennessy – President and Chief Executive Officer

Thank you, Glynis. Hello, everyone and thank you for joining us today. We are pleased with the performance of our overall business in the second quarter. On a consolidated basis we have reported net sales of 1.4 billion up 9% year-over-year and gross profit also grew 9%. Earnings from operations excluding the goodwill impairment charge taken during the quarter were 46 million up 6% over the 44 million recorded in the prior year quarter.

The Q2 2008 results include approximately 3.5 million in severance and restructuring expenses. While the second quarter of 2007 results include 2.8 million of severance expenses and 4.3 million of expenses associated with our stock option review. Diluted earnings per share was $0.58 excluding the goodwill impairment charge, but including the severance expenses I just mentioned, up from $0.54 last year.

Our EMEA recorded very strong results in the second quarter. Net sales increased 15% to 382.3 million and gross profit grew an impressive 25%. Net sales in our hardware category in UK return to positive growth during the quarter, reflecting actions taken late in Q1 and our software and services categories in EMEA performed very well, posting sales growth of 21% and 33% respectively.

We are especially pleased with our performance in certain new markets like Russia. For example, where we won our first significant new client as a result of our decision to establish a local presence in the country. Overall, the market in EMEA continues to be challenging, and we believe we are well positioned to continue to grow profitably.

To get us more flexibility, during the second quarter we eliminated 28 positions in the region. As a result we recorded severance expense of approximately 2.2 million during the quarter and are targeting 1.5 to 2.0 million in annualized cost savings from those actions.

Also we are excited about the acquisitions of Minx in the UK which we announced just a few weeks ago. While Minx is relatively small today generating approximately 25 million pre-year net sales, this strategic acquisitions give our UK utilization a stronger market position within the fast clearly networking category and provides us with a gold level certification from Cisco in the United Kingdom. Overtime we expect to leverage this acquisition along with the Calence transaction that we closed here in the US in April to build out our global capabilities around networking similar to what we enjoy today in the software category.

Our Asia Pacific operating segmenting also had a very strong second quarter more than doubling its net sales and its earnings from operations compared to the second quarter of 2007. The decision we made in the first quarter to invest in 13 new sales professional in the region clearly paid big dividends during the quarters. We also are pleased by our performance in new markets like China where we grew 37% year-over-year.

Now on to North America. Net sales in our North America segment increased 4% to 957 million in the second quarter. These results include the results of Calence the acquisition we closed on April 1st which more than offset decline in our legacy hardware business.

We are very pleased with the performance of the Calence acquisition so far and look forward to continuing to grow our networking business faster than the market. Calence were mutual to EPS as expected, but contributed to the growth of both sales and gross profit during the quarter.

Going into the second quarter, we were concerned about the uncertain outlook of our software business and put in place detail plan including the creation of our cross functional team to drive daily sales to our Microsoft, and incentive programs for our sales team ensure we optimize the quarterly results. Those plans worked very well and coupled with Microsoft strong efforts enable us to achieve solid results during the quarter. Net sales were relatively flat compared to our record studying second quarter of last year by added even higher gross margin.

Excluding Calence net sales in our hardware category were down in the second quarter across all of our client sets reflecting the difficult market we are faced within 2008 as client rationalize their CapEx earnings and the fact that we have yet to fully regain loss crown associated with our IT systems migration the begin at the end of the second quarter of last year. As it relates to the market we continue to see very aggressive pricing during the second quarter. As a result, gross margin in North America were 14.2% down a little over 30 basis point compared to the second quarter of last year. Reflecting notable attribute over the 80 basis point declined we saw year-over-year in the first quarter of this year. Thanks impart to the contribution of the higher margin networking mail services business from Calence.

Just a few updates on internal misuse before I handover the call to Glynis. First, our IT system upgrade project continue to progress during the second quarter. Net sales to SMB client increased 7% compared to the first quarter of this year reflecting the progress we are making to improve the lab experience on our new IT platform and win back clients. We are also slow on track complete the migration of our legacy US based hardware and services business by the end of this year. Second, on our last call we indicated we’re going to look deeply into our organization structure to identify way to reduce our expense profile by also increasing our effectiveness.

In just a few minutes Mark McGrath will take you through the organizational restructuring efforts. We have to manage in our US business during June and July. As part of that effort we separated 44 people from the business, we recorded severance expense of 1.3 million in the second quarter. We are targeting 2.5 million to 3.5 million in annualized cost savings from these actions.

We are generally pleased with the North American results in the second quarter and feel that we’ve regained some of ground lost in the first quarter particularly in an SMB business. Having said that we scale our work cut off was in the second half of the year as it continue to compete in a challenging demand environment. So we are reiterating our previously issued guidance and we expect full year 2008 diluted earnings per share to be between a $1.50 and a $1.60 before the goodwill impairment charge, severance, restructuring and other non-recurring charges. This outlook reflects our current slightly more positive view on our software business giving this performance in second quarter, offset by continued concern over the overall hardware market. And the expected benefits of the expense reduction action we implemented in the first the half of this year.

Now I ask Glynis to provide more details our second quarter 2008 financial performance across each of our operating segments. Glynis?

Glynis Bryan - Chief Financial Officer

Thanks Rich. Starting with our North America segment. Net sales grew by 33 million or 4% to 956.9 million. This included the benefit of the Calence acquisition which we closed at the start of the quarter. Calence contributed to our hardware as well as our services performance in the quarter. Hardware grew 2% in the quarter as sales from Calence offset to decline our legacy hardware business. Our services sales were up over 100% in the quarter reflecting double digit growth in our legacy, services business and the addition of Calence to our portfolio. Please recall that the professional consulting and managed services business of the Calence for key drivers of the acquisition.

Software sales were relatively flat this quarter when compared to the record level net sales reported by the software team in the second quarter of last year. Gross profit grew by 1.8 million or 1% to 135.9 million. The growth in services and software gross profit generated by the legacy business and the acquisition of Calence more than offset the decline in hardware gross profit. Gross margin was 14.2% versus 14.5% reported last year. This decrease is primarily due to decreases in product margin which includes private funding and was primarily driven by market as pricing pressure. These decrease since were offset partially by the improvement in gross margins resulting from increased sales of services which are typically at higher margin.

Selling and administrated expenses increased 5.2 million or 5% to 106.3 million compared to 101.1 million reported in the prior year quarter. The 2007 second quarter results include 4.1 million in expenses associate with the companies stock option review. The total increase year over year is entirely due to the acquisition of Calence. In fact selling and administrative expenses in the legacy Insight business were down year-over-year due to detained expense management initiative we’ve been focused on over the past two quarters.

Excluding the goodwill impairment charge taken in the North America segment which I will talk about in just a moment, our North America business reported earnings from our positions of 28.3 million which was down 6% compared to the second quarter of last year.

A few more details on the Calence transaction. Calence performance during the quarter met our expectations. As we had anticipated Calence was new EPS in the quarter but have a positive impact on net sales, gross profit and earnings from operations.

Also, we have completed our purchase price allocation and we have recorded 29.2 million of intangible asset other than goodwill with bearing average life. Annual amortization associated with these intangibles will be approximately 4.8 million in 2008 and approximately 3 million in 2009 to 2012 and then declining thereafter.

Moving on to our results for EMEA and APAC. As Rich pointed out net sales in EMEA increased 15%, and excluding the benefit from foreign currency net sales increased 7%. These great sells result are a testament to the strong sells model and execution in this region giving the challenging EMEA IT market. Gross profit in EMEA grew 11.3 million or 25% while gross margin increased a 160 basis point to 14.7% due primarily to increases in product margin which includes funding as well as increases in agency fees for Microsoft enterprise agreement.

Selling and administrative expenses in EMEA increased by 6.6 million year-over-year. The increase is primarily due to the increase salaries and wages employee related expenses and contract labor of approximately 5 million, due to increases in sales incentive program and employee headcount. Also the effective currency exchange rates between the weak US dollars as compared to the various European currencies in which we do business, economic were approximately 2 million of the net year-over-year increase.

Earnings from operation in EMEA increased 22% to 14.1 million. These results include 2.2 million in severance expense reported in the second quarter of 2008. There is not much more action which is commented on our APAC segment. Net sales to a 112%, gross profit grew by 3.9 million to 9.5 million. We are averaging our operating as operating expenses as a percentage of net sales declined this quarter to 9.5% from 13.6% last year. We’re definitely getting the pay back from the investments we made in the first quarter to expand sales expertise in this region.

On cash flows our operation carried a 52 million in cash flow during the second quarter. We used 35 million to repurchase shares of our common stock, an addition 9 million with invested and capital expenditures during the quarter. We also acquired Calence in the quarter and funded the transaction with a 125 million of debt under a new debt facility.

We ended the quarter with a 110 million of cash of which 62 million was reverent in our foreign subsidiary. We announced in our first quarter call that a sustained significant declined in our stock price would likely causes to perform an interim goodwill cash and could result in a non-cash goodwill impairment charge. Based on the priceable stock at June 30, 2008 and during the second quarter the market value at Insight was less than good value and therefore implied that one or more of our operating segments could also have fair value of less than book value.

Simply plus, this sustained significant decline in our stock price in the second quarter required that we perform the interim goodwill test. Based on the results could be impairment testing the goodwill in our North America segment is impaired and required that we ride off all of the goodwill in North America. This is a pre tax $340 million charge and about $201 million after tax in our consolidated it financial results for the second quarter. This is a non-cash and does not impact to our borrowing capacity or ballade or change any of our debt covenants. There was no goodwill charge in either EMEA or Asia Pacific. That concludes my comments and I will now turn the call over to Mark.

Mark McGrath

Thanks Glynis. As Rich referenced earlier the American team was very focused throughout the quarter again back to moment where we lost in the first quarter and I believe we are making progress. Our initiatives around software helped us deliver solid financial results for that portion of our business in the second quarter the integration we put in place relative to the Calence acquisitions help us successfully integrate that business in the Insight as a strategic networking team and we continue to make a progress on our IT systems upgrade project.

In addition, the expense action we took in the first half of the year help produce our cost base and will provide us flexibility to continue to execute against our strategic objectives. We continue to strengthen our business for growth, we also concluded in the quarter that we needed to restructure many aspects of the US business not only to become more efficient from an expense perspective, but also they continue to evolve our approach to gain profitable market share as part of our global buyer strategy.

Here are the main highlights of the organizational changes. First, we merge our SMB and enterprise sales organization into a single client facing team. As you know, we had historically operate separate sales organization for enterprise in SMB. The SMB came in had been predominantly telesales with some fuel coverage and our enterprise had been fueled with weekend size sale support. While both of these organization had strong kill in the client relationship having two organization created redundancy, client coverage inefficiencies and in some cases on our overall ability to drive accountability across the team to penetrate that new clients.

We believe by combining these teams we can better leverage one of our strongest assets which is our outstanding fuel selling skills with our excellent telesales skills to create better market coverage, improve sales productivity and create greater accountability across the team. We also announced the position of our three speciality teams that are strictly focused on software, networking and services within our coverage model. As specialty these teams will have deep expertise in the work of our client facing to help identify and close incremental business around our solution areas.

The final organizational changes relate to our client support organization. We are consolidating our marketing and product management teams to drive greater synergies and alignment with our partners. And we are consolidating all of our pre-shell support resources in the one organization that will support our sales teams.

We believe that by adding one mere with one set one processes, tools and metrics we can greatly allege the leverage support to our sales teams and clients that accelerate sales productivity improvements. All of these changes are excited in part of the national evolution of our organization, in support of our trusted advisor value preposition of our clients design to fuel our continued success.

I will now turn the call over to the operator to open the line for your question.

Question-and-Answer Session

Operator

(Operator Instruction). Our first question will come from the line of Brian Alexander of Raymond James. Please proceed.

Brian Alexander

Thanks good afternoon guys. Just on the implication of your guidance the $1.50 to a $1.60 which you provided last quarter and implied you would do about $0.51 to $0.56 this quarter excluding charges and I think if you backup the charges this quarter you did about 63, so you had some pretty meaningful upside this quarter, you also commented that your software business performed better than expected and I know that was key concern coming into the quarter and the expense which you’ve outlined today should be some additional benefit going forward as well. So I am just – given all that I am wondering why the range for the year didn’t go up? What are the main factors in your mind that are keeping you from raising $1.50 to a $1.60 in light of the upside and all the factors I mentioned. Thanks.

Rich Fennessy

Sure Brian. First and foremost the expense actually that we took in 2Q as well as 1Q in the benefit of those expense, that’s actually we took any consideration, we created the dollar to be 60 range on the last call. So we knew it and take as we call on the last earnings call some actions in the second quarter which we took and we think there is a right action to get our expense structure to where it need to be. But as it relates to looking at our 2Q results was clearly better than we were anticipating as we are very pleased by that. Really we did two things, one is we are – we are optimistic on our software business which we called out and we see that’s playing out in the second half of the year. While at the same time we are actually quite conservative about the hardware market, and now the uncertainties we are seeing the marketplace today relative to the CapEx and people looking at their desktop no book service span and whether they can defer those projects into filing here. So we are actually looking to slower hardware growth in the second half of the year then we originally would expect in that kind of offsetting some of the upside that we solve in the software business in the second quarter. So the combination those fact and as well as these are the general uncertainty of the market and as I think we go on the second half of the year obviously, we are looking to go – trying to go drive the hedge performance, but as we look at it we think overall we are very slow demand environment.

Brian Alexander

Is it fair I guess look at the rest of the year similar to how last year played out where just from an EPS perspective of the last year you were surprised by the negative seasonality in the third quarter and the ended up coming in at $0.21. It sounds like for the rest of the this year you are assuming kind of flattish EPS growth or I have that incorrectly and may be some other quarters you’re see growth in some of the quarters you can see declined year-over year?

Rich Fennessy

Yeah. We did exactly year-over-year where EPS perspective in 3Q and 4Q we had come in right around a $1.55 for the full year. So, which is right on the middle of our range. So as we look at it that’s a fair as assumptions how you will drive at least year-to-year flat and obviously – our goal is to drive year-to-year improvement.

Brian Alexander

Right. And then if I can just switch gears to the Hardware business in North America, if I back out what may assumption is for Calence, it sounds like that business did about 75 million in the quarter and I think that recall maybe three quarters of that being hardware from previous call. So if I back that out, it looks like your hardware business in North America might have been down somewhere around 8 maybe 10% year-on-year which is a little bit great over decline that you saw in the first quarter, and I am just wondering hw much of that accelerated decline do you think was market weakness versus more exacerbation from your system issues versus maybe a decision to walk away from on profitable business given the pricing actions we talked about from competitors.

Rich Fennessy

A combination of lot of factors but I mean, else, given the way we have integrated student together, we don’t call our Calence versus non-Calence business today, but as we did call we did see in the Harbor business a year-to-year decrease across all customers’ debt in our Harbor segment. As you recall, we have 60% enterprise mix for the most of North America, 32% or so SMB and 8% or so public sectors and in the enterprise space we are clearly seen our clients scrutinized you CapEx running very much and we are seeing show up in terms on our year-to-year growth. As it relates to our SAB migration we do actually do good on the SMB side of the equation that we made progress in the quarter and we feel good about the 7% year-to-year, quarter-to-quarter I should say growth in the first quarter, second quarter, we’re actually relative to first quarter same quarter actually would back to low ask ground. So on the SAB side, we see like trending, and we see 3Q hopefully improving by net 4Q the same as we finished our migration by the end of this year. But in the enterprise space as well as public sector is really to stay in local we are seeing some concern than Hardware which again we try to make in consideration as relates to we steady in our guide without 50 to $1.60.

Brian Alexander

Okay. Maybe just a couple of more. It sounds like on Calence you’re not going to be able to provide anymore breaks out there and I am just going to ask if there is anyway to help us think about the gross profit in EBIT contribution excluding any non cash amortization charges that you are taking or may be at least if you cant do that, let us know qualitatively if there is any reason to believe that that business is an operating at the levels with operating at when you close down the deal?

Rich Fennessy

No actually I mean, overall you too see in our earnings obviously the networking category which is now we’ve asked Mike Fong who was the CEO Calence now actually run that combined business they’re doing that today, so we’ve integrated together and you can see overall some – and you will be seeing every quarter just how that networking categories is doing. As it relate to the second quarter as we closed on the April 1st overall I would tell you they a very strong performance on our first quarter of ownership, one there is historical high in terms of growth and we are pleased three months ended where in terms of how that business is planned inside of Insight.

Brian Alexander

And should we still think of that as kind of a mix single EBITDA margin business or is there any reason why that change?

Rich Fennessy

There is no reason why that change.

Brian Alexander

And then finally just on the issue which was obviously a big upside surprise at least for me and probably for you, anything you need you want to that you want drilling to in terms of maybe some large deals that wont recur, was there any core on ahead of the Olympics or anything that had decide China was up something like 70%. I am just wondering if there is anything unusual in that quarter or do you think we had phase just so there is anything that you heard China was up something like 70%, I am just wondering for is there anything on usual in that quarter or do you think we’re at page right now where that business is going to continue to grow substantially year-over-year? Thanks.

Rich Fennessy

Yeah, I think since we saw spectrum acquisition having every number in front of me we have had – we have been pleased every quarter with kind of performance we have seen at Asia Pacific and they definitely had a very strong quarter and I said nearly doubled when will have we have been pleased every quarter with kind of performance we’ve seen on Asia Pacific and they definitely had a very strong second quarter and I said nearly double what they did second quarter last year both on EFO as well as net sales . And the nice thing about the results – there was no – there was not 1, 2 key transaction which general health across all the countries that we are in. So that business, we moved into leader back to run that business and she continues -- she has been now back for several months now, she did a very good job in the quarter as we look at our business going to in 3Q and the second half of this year, we are expecting to continue to see good things from that business. Now kind of the strategy that we had, as we all know the US economy is the tough one. The strategy of diversifying both in Europe as Asia Pacific is playing out just the way we would hope it would, but the kind of growth as they did enjoy in Europe and as well as kind of growth our specific business enjoyed really offsetting some of the exposure that we’ve seen in overall US market, and obviously as we look at the investment they we’re making, we are looking to continue to fuel that. So if you look for example an head count growth in EMEA you see roughly substantial head count growth in our sales organization in EMEA and surely part of our strategy how we will to continue feel that as we kind of weathers on the storms of the uncertain demand environment we have in the US marketplace.

Brian Alexander

Okay thanks a lot Rich.

Operator

Our next question will come from the line of Matthew Sheerin of Thomas Weisel Partners, please proceed.

Matthew Sheerin

Yes thank you. Just a follow up on couple Brian’s questions. Just regarding your commentary on hardware demand it definitely found a bit more cautious on the second half and you did in the first quarter, but suddenly you’re not allowing a lot of your competitors and distributions suppliers have said the same thing. I guess, if you could just drill down a little bit more, did you see push out fleet in the quarter, are there anything kind of broadly speaking that customers are telling you that they’re putting things on hold now?

Rich Fennessy

No I would say at the end of the quarter it take phenomenal, I would say throughout second quarter we saw an increase -- but I think its little bit more surprising to what we saw in the first quarter is the level of slowdown in the enterprise segment from what we were expecting, because first quarter we definitely saw a March, while also net really slow down and I that was I do – it was different more we experienced in January, February the right enterprise, I would tell you enterprise throughout the second quarter was just the slow quarter, and we see that is kind of one thing we are concerned about going into the second half of the year just CapEx spending in stead of just being referred in first half or second half where that’s been pushed off already 2009.

Matthew Sheerin

Okay that's helpful. And then you talked about pricing pressure in North America in the hardware business have you found that due to the fact you did loose some customers because of the migration of your IT systems and MICP and the if had ago and deal will be with more aggressive on pricing to bring customers back?

Rich Fennessy

We are definitely aggress in the market place and but I would say its not -- we are not unique and I think we’re seeing the across the board which was I mean, -- we are down 80 points as we call our 1Q year-to-year and now we’re down 30 basis points. So we are actually pleased a little bit that we saw last price deterioration quarter to quarter. Part of that is driven by the fact we did have counts and makes now with the higher margin offset some of the decreased in a year-to-year basis, but I don’t think the pricing aggressiveness in the marketplace even you need to ask when that customers I think its just a more of factor f slow demand and every clinical when the business at it does exist out there.

Matthew Sheerin

Okay and then just switching geography the UK where it sounds like hardware sales is bouncing back a bit and it sounds like the demand picture is better. How much of that do you think is attributed to the market they are versus a just improvements in the overall business in your infrastructure?

Rich Fennessy

I think its improvements in our business or versus the market strength. And I think the UK market is very close to the US market as demand picture and as we call on our first quarter call we in the first January, February that we have some slowness in that business and we made some leadership changes and some just overall design changes for how we’re going to market and we started in March and we saw some improvements in late March going into April which we called out in the call for fiscal results. I would say those improvements played out through the whole second quarter and we believe that the leadership team understood and his team have really kind of fixed the issues where we did have and we are really pleased that we definitely regain market shares relates to the UK market place my hardware perspective.

Matthew Sheerin

Okay thanks. And just lastly, just quick question of Glynis on the interest expense, is that going to be somewhere this quarter than it was last quarter?

Glynis Bryan

Math, this is third quarter versus second quarter.

Matthew Sheerin

Yeah.

Glynis Bryan

I mean, we have required the Calence acquisition that was a big driver increase in our overall debt, debt related to interest expense in short of market rates change and et cetera you should anticipate its going to be similar.

Matthew Sheerin

Okay. Thank you.

Operator

(Operator Instructions). Our next question will come from the line of John Lawrence of Morgan Keegan. Please proceed.

John Lawrence

Good afternoon.

Rich Fennessy

Hey John.

John Lawrence

Rich, could you go and maybe Mark wants to discuss it a little bit as far as talk a little bit about -- I mean just to get in the system just a little bit. As you look at these clients that you have on both sides of -- they are trying to do the software business and the hardware business. Is there a push back because of the system, because of some of that as they cross over or is that not where the issue is?

Rich Fennessy

No, no, we have (Inaudible) because we are running our software business through the legacy software spectrum IT system and we are running the Insight businesses a legacy Insight system. And from a customer perspective, quite honestly that's working quite nicely. I mean they don’t mind in fact we had merged one system. So the only thing that we believe we are not seeing all the opportunities that we like to see. There is internally the content of cross selling and trying to go leverage with the client, the software client, you gave about hardware trying to go sell hardware to him. We believe we will have now leverage that to the extent that we can. In fact it is behind our restructuring. So the whole concept of restructuring our sales approach, which is a big deal in terms of bringing SMB and enterprise businesses together was really designed to do two things. One is to go drive more cross selling by leveraging the specialty teams that we have positioned around our front end called the general sales organization and two was really to go after this net new opportunity. So in this slow demand environment, clearly when you have effect customers who have been doing certain amount of spend with you may start to slow, you either just weather that storm or you are trying to redirect that sales talent to go win back net new business and we believe by going to the three structure that we just went through, which we now it's about four weeks ago is that we can go get back and start be much more aggressive from a net new win perspective.

John Lawrence

And so the end result is there is less people that know more about what's happening of that account across segments. Is that the way to look at it?

Mark McGrath

No John, I would tell you I think I look at it that regarding enterprise field team, now team with an SMB tele team so you got in terms of client facing exercise in many cases more resource and then would be specialties around networking services and software, you got absolute clarity of which specialty organization to bring in to go drive that cross selling. So we think the combining of this is more productive, less redundancy, more clarity with the client and in fact we think we are going to get more client facing resources for that client.

John Lawrence

All right.

Rich Fennessy

One other things is a typical concern anytime you hear so many go into a seller restructuring is there is going to be disruption in the business and one of the things that we are very focused on through this effort in addition to getting more efficient is try to go make sure we don’t disrupt any existing client by relationship. So there is no client that has relations today with an Insight sales person who doesn't today has resulted after the action of still of that same relationship with the same sales rep. So that was very important to us. My other action you seem to low other competitors take, we have break relationships and see a diff in your sales productivity. One of that design points and our restructure of our sales team was to maintain the client relationship with their existing sales rep, which we have been able to do, which we believe will allow us not to see the downturn but at the same time go get that sales meeting that folks and net new clients as well.

John Lawrence

Great. Thanks guys.

Operator

(Operator Instructions). This concludes the question and answer portion of today's conference. I would turn the call back to management for any closing remarks.

Rich Fennessy

Overall, thank you very much for joining today's call. We are pleased in today's challenging market environment with the results we were able to demonstrate and post here in the second quarter. We are also pleased with some of the action we have taken like the closing of the Calence acquisition April 1st, the closing of the Minx acquisition in the UK and now this restructuring of our sales approach. We think the combined effect is really a better go-to-market approach from a sales perspective as well as stronger capabilities around our solution areas in line with our strategy to be a global war that we have been able to go pull off here in the second quarter. As we go into the third quarter and the fourth quarter, I will say our design is to continue to go drive improvements from an execution perspective and we look forward to sharing those results with you in upcoming calls. So thank you very much.

Operator

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Source: Insight Enterprises Inc. Q2 2008 Earnings Call Transcript
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