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Thank you. I'll now turn the call over to Mike Zellner.Mike Zellner Thanks, Dave. I'll review our second quarter 2010 results and financial position and then turn it over to Greg to discuss our business activity in detail. PMC-Sierra had a strong second quarter generating our fifth consecutive quarter of revenue growth. Revenue in Q2 was $160.7 million and reflected an increase of $7.9 million or 5.2% over Q1. On June 8th, we closed our purchase of Adaptec's channel storage business. Revenue contributed by the channel business for Q2 stub period was in line on pro rate basis with the fourth quarter revenue estimate of $12 million to $13 million indicated in our previous investor conference call. Our turns business, I mean those orders booked and shipped within the same quarter was 14% in Q2 compared to with 17% in Q1. In Q2, we had one customer that represented greater than 10% of our revenue calculated on a 12-month rolling basis, namely HP. Gross margin in second quarter was 69%, which was 90 basis points higher than Q1's 68.1%. This improvement was driven mainly by product mix partially offset by inventory related integration cost from our acquisition of Adaptec's channel storage business last month. On a non-GAAP basis, operating expenses increased by $2.7 million from $59.3 million in Q1 to $62 million in Q2. This was in line with our outlook on expenses provided on our previous quarterly conference call. The increase relates mainly to planned hiring and investments in R&D as well as annual merit increases, stub period operating expenses included for the acquisition and foreign exchange on our foreign operation. In Q2 our non-GAAP operating margin reached 30%, which is at the high end of our targeted operating margin range of 25% to 30%. The non-GAAP tax provision was slightly lower in the second quarter at $1.7 million compared to $2 million in Q1.
Non-GAAP net income for Q2 was $47.6 million or $0.20 per share on a diluted basis, representing a $4.1 million or 9% increase over $43.5 million generated in Q1. On a year-over-year basis, non-GAAP net income increased by $17.9 million or 60% from the $29.7 million generated in Q2 of 2009.Q2 GAAP diluted net income per share was $0.13 versus $0.12 in Q1. The comparable GAAP measures for each of gross margin, operating expenses, operating income, provision for income taxes and net income are reconciled to the related non-GAAP amounts in our reconciliation of GAAP to non-GAAP measures included in our press release issued today. The primarily reconciling items of Q2 are as follows; $6.8 million in amortization of purchased intangible assets, $5.7 million in stock-based compensation expense, $800,000 of non-cash interest expense, $1.5 million of acquisition related costs and $2.7 million of income tax related adjustments as described in our press release. Turning to the balance sheet, we ended the quarter with over $500 million of cash and cash equivalents, short-term investments and investment securities. Our cash position at quarter end net of the $68.3 million face value of our convertible note was $433 million, an increase of $15.2 million from Q1. The net increase relates primarily to the $47.7 million of non-GAAP net income in the quarter and $2.2 million of cash from employee related stock issuances offset by $34.2 million paid for the acquisition and $3.3 million of IP and capital expenditures. In Q2, cash flow generated from operations was a strong $51.9 million, our highest in nearly a decade. Accounts receivable increased $19.6 million to $79.8 million including the acquired channel storage business. Excluding the effect of the acquisition, we have 39 days sales outstanding based on a quarterly sales volume. This was slightly higher in terms of days than we had in the prior quarter but remains a very healthy collection to profile. Read the rest of this transcript for free on seekingalpha.com