Anil Singhal - President & CEO Michael Szabados - COO Jean Bua - CFO Andrew Kramer - VP, IR.

Scott Zeller - Needham & Company Mark Kelleher - D.A. Davidson Eric Martinuzzi - Lake Street Capital Markets Kevin Liu - B. Riley & Co. Alex Kurtz - Sterne, Agee Matt Robison - Wunderlich Securities Mark Sue - RBC Capital Markets Chad Bennett - Craig-Hallum.

Well, ladies and gentlemen, thank you for standing by and welcome to NetScout's Second Quarter of Fiscal Year 2015 Operating Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given to you at that time.

As a reminder this conference call is being recorded. With us today is NetScout's President and CEO, Mr. Anil Singhal. He is accompanied by NetScout's Chief Operating Officer, Mr. Michael Szabados; the Company's Chief Financial Officer, Ms. Jean Bua; and VP of Investor Relations, Andrew Kramer. At this time, I will turn the call over to Andrew Kramer..

Thank you very much, Stephanie and good morning everyone. Welcome to NetScout's fiscal 2015 second quarter conference call for the period ended September 30. We have included on today's webcast a slide presentation to accompany our commentary.

For those listeners who have dialed into the call this morning and would like to view this slide presentation, you can find it by going to our website at www.netscout.com/investors and then clicking on today's webcast. You can advance the slides in the webcast viewer to follow along with our commentary.

And we will try to remember to call out the slide number we are referencing in our remarks. In terms of our agenda for today's call, I'd turn your attention to Slide number 2.

Anil Singhal will first focus on providing a more in-depth and detailed view into our planned acquisition of Danaher's Communications business and why this is the right move at the right time for our company. He will then share his perspective on our performance this quarter.

Our COO, Michael Szabados, will provide an update on key use cases driving customer adoption and other initiatives shaping our business today. CFO, Jean Bua, will then provide additional financial insight into our financial performance, as well as discuss our guidance for the fiscal year.

Now, before we begin with our prepared remarks, I'd like to direct your attention to Slide number 3. NetScout will file a Registration Statement on Form S-4 containing a proxy statement and prospectus of NetScout and other documents concerning the proposed acquisition with the Securities and Exchange Commission.

Investors are urged to read the proxy statement and prospectus when it becomes available and other relevant documents filed with the SEC because they will contain important information.

You can obtain a free copy of the proxy statement and prospectus and other documents filed by NetScout with the SEC at the SEC's website at www.sec.gov or on our own website at www.netscout.com. You may also contact me directly. This communication is not a solicitation of a proxy from any security holder of NetScout.

However, NetScout, Danaher, and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from NetScout's stockholders in connection with the proposed transaction.

Information about NetScout's directors and officers and their beneficial ownership of NetScout's common stock may be found in its definitive proxy statement relating to its 2014 Annual Meeting of Shareholders filed with the SEC on July 24, 2014. This document can be obtained free of charge from the SEC website at www.sec.gov or from our own website.

Moving on to Slide number 4. I would like to remind everybody listening that forward-looking statements in this presentation are made pursuant to the Safe Harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and other federal securities laws.

Investors are cautioned that statements in this presentation, which are not historical factors, constitute forward-looking statements, which involve risks and uncertainties.

These risks include without limitation, our financial guidance for fiscal year 2015 and the anticipated timing, terms, or benefits of the proposed transaction involving NetScout's acquisition of communications business lines of Danaher Corporation.

Actual results could differ materially from the forward-looking statements, including those related to the company's confidence in its strategic guidance and the timing associated with completing the acquisition of Danaher's Communications business.

Risks and uncertainties which could cause actual results to differ include, without limitation, risks and uncertainties associated with the failure to obtain, delays in obtaining or adverse conditions related to obtaining shareholder or regulatory approvals; the anticipated tax treatment of the transaction and related transactions; risks relating to any unforeseen changes to or the effects on liabilities, future capital expenditures, revenue, expenses, synergies, indebtedness, financial condition, losses, and future prospects; failure to consummate or delay in consummating the transaction for other reasons; our ability to retain key executives and employees; slowdowns or downturns in economic conditions generally and in the market for advanced network and service assurance solutions specifically, NetScout's relationships with strategic partners; dependence upon broad-based acceptance of network's network performance management solutions; NetScout's ability to achieve and maintain a high rate of growth, introduction and market acceptance of new products and product enhancements; the ability of NetScout to take advantage of service provider opportunities; competitive pricing pressures; reliance on sole sources and suppliers; successful expansion and management of direct and indirect distribution channels; and dependence on proprietary technology and the ability of NetScout to successfully integrate Accanto Systems and ONPATH Technologies, and achieve operational efficiencies.

I'm not sure whether it's possible, but if you would like a more detailed description of the Risk Factors associated with NetScout, please refer to NetScout's Annual Report on Form 10-K for the fiscal year ended March 31, 2014, on file with the SEC.

NetScout assumes no obligation to update any forward-looking information contained in this press release or with respect to the communication described herein.

Finally I would like to remind you all that while the slide presentation includes both GAAP and Non-GAAP results, unless otherwise stated, financial information discussed on today's call will be on a non-GAAP basis only.

Non-GAAP items are described and reconciled to GAAP results in today's press release and they are included at the end of the slide presentation that is made available online. I would also note that growth rate discussions are based on year- over-year basis unless otherwise noted. That concludes my perfunctory remarks.

I will turn the call over to Anil at this point..

Are we biting off more than we can chew? My answer is simply, no. That and these are some of the reasons. First, we have proven before that we can integrate the product lines we acquire, along with the people responsible for development, selling, and support.

When we acquired Network General, we were able to retain virtually every single senior leader across all areas of that business, including sales, and they are still working with us today. We integrated the product lines in ways that added value for customers and without much dislocation to the sales activity.

We also streamlined and improved the manufacturing process and other area that helped drive improved gross margins. Second, these businesses do not present the same type of product overlap that existed when we acquired Network General.

This will make integration a more straightforward process from a development and engineering perspective, as well as from a sales, marketing and support perspective. Third, as I mentioned on Monday, we have very compatible cultures.

Both teams believe in the power of "traffic-based" instrumentation, a customer first mentality, and working on creative solutions to solve the next generation problems. This was further reinforced during the extensive diligence process both sides engaged in, prior to the announcement.

I am very pleased with the reception we've received from the teams at Danaher Communications. During the meetings I have conducted at various U.S.

locations in the past couple of days, I feel that their people are eager to join our company, which is a bigger pure-play leader in this space, which is better aligned with their market focus and which has long track record of staying power and innovation.

In addition, I am very pleased to have an experienced executive like Jim Lico, join as Director on the NetScout Board. Jim was instrumental in building the Danaher's Communication Group franchise over the past 10 years and has very deep knowledge of all aspects of this business.

Jim and I have built tremendous mutual trust and respect for each other, during all the hard work and discussions leading up to this announcement. His expertise and advice will be very valuable to me and our team, during the integration phase of this transaction. Let's move on to the last question, which is on Slide number 12.

What type of synergies are possible and when will they be achieved? As I just mentioned, the experience we've gained in the past provides a solid foundation for us so that we can take the steps necessary to pursue meaningful synergies in a short time.

These actions, in conjunction with anticipated revenue growth, will help us drive profitability substantially higher, particularly as we move out of year one, into year two, of the combined operation. As we said on the call, this deal is accretive on a non-GAAP basis in the first full year of operation.

However, in any business combination, there are always cost synergies and this is no exception. We expect to be able to leverage our purchasing power and extend our proven manufacturing techniques in ways that will improve product gross margin by a few percentage points over the next few years.

Additionally, we will integrate the operations of the three companies we are acquiring, and be able to achieve synergies by using common infrastructure platforms, and by eliminating or reducing expenses associated with programs and capabilities already in place.

Overall, during the first year of combined operations, we initially estimate that it is probable to identify, remove, and begin realizing cost synergies of about 5% on the $900 million within the combined cost base of both organizations.

We expect to realize the full effect of those initial actions in the second year of operations, while also exploring the potential to improve upon that as we more closely examine how to best align our go-to-market and related support and programs and initiatives.

This also does not include any potential savings that we can realize moving forward after the acquisition closes. While much of this was learned in greater detail during our mutual diligence processes, Jim Lico and I had been discussing the industry and challenges for a few years.

This prompted us to start exploring the possibility of combining the Danaher's Communication business with that of NetScout, as it can help us grow our scale, size, and reach on multiple fronts. And that's what we have done with our announcement on Monday.

Customers can immediately benefit from this combination, as soon as the transaction is closed, and we will deliver strong revenue growth, which, in combination with prudent investment and taking advantage of substantial operating synergies that exist, will enable us to push profitability higher and generate exceptional free cash flow.

The response this week from the industry, our customers and employees at both NetScout and Danaher has been terrific. We know that we have more work to do with the investor community but I ultimately believe we're going to be enthusiastic.

I hope that this context around the proposed acquisition has been helpful, although we recognize that this won't answer every question you may have. Jean, Andy, and I will plan to spend more time meeting directly with you in the weeks and months to come, as we strive to help you understand the full potential of this transaction.

With that said, I do want to make sure I spend some more time on the excellent results we reported this quarter. Our performance this quarter reflects the continued market acceptance of our nGeniusONE product, which is powered by our ASI software and was launched about a year ago.

We are pleased with the momentum we continue to build our customers worldwide. Our largest service provider customers continued to spend with us during the second quarter, and we continue to identify new pockets of opportunity with them and other service provider customers.

We were also pleased with the order flow from our enterprise customers, which was complemented by improvement from our government customers. We believe these dynamics bode well for us as we move forward. At the mid-point of our guidance, our revenue is on target with 46% achievement already.

And similar to the past couple of years, we expect a strong second half of this fiscal year. Consequently, we have reiterated our guidance and left our target for revenue and EPS unchanged. The revenue range represents 13% to 17% growth and the EPS range represents 14% to 18% growth. I mentioned earlier that our markets are growing.

According to research firm IDC, the market for network management software is expected to grow 4.1% this year, with a compound annual growth rate of 6% projected through 2018.

Other sectors like application performance management, cyber security, and business intelligence are growing as fast or faster, and the lines between some of these traditionally distinct areas are blurring. With our proposed acquisition, we believe that we will be able to be well-positioned to thrive in growing end markets on multiple fronts.

In the service provider vertical, we see continued growth from our customers. The service provider demand for a higher value intelligence and analytics remains strong. We have a strong pipeline and continue to believe that we will have 20% or more growth in this vertical.

As we discussed last quarter, while our mid-year growth rate on service provider is almost 50% for product revenue, we continue to believe that it will normalize to the 20% level. We see significant opportunities ahead. As you know, service providers are actively evolving their core to 4G/LTE mobile networks in both the U.S.

and abroad, and this plays into NetScout's sweet spot. According to recent research from Ovum, the number of LTE mobile broadband subscribers around the world reached the 250 million milestone this past spring and it is expected to exceed 2 billion subscribers by 2019.

Within our Enterprise vertical, revenue grew 12% on a year-over-year basis, as we saw improved demand from a variety of industries, most notably healthcare.

On a related note, adoption and deployment of nGeniusONE continued into the second quarter, and we believe that this platform will become increasingly relevant for enterprises seeking real-time operational intelligence that can help them proactively identify, monitor, and resolve service issues.

Our installed base of loyal enterprise customers provides us with an excellent position from which we can gain mindshare and continue to grow. Our enterprise customers have traditionally relied on our capabilities to manage and optimize their networks.

Our new Service and Traffic Triage value proposition will continue to drive our growth in the coming months, and will be further bolstered by inroads into the unified communications and packet flow switch segments of our business.

Since this is the quarter that coincides with the federal government's year-end, we also saw growth due to primarily to the timing and magnitude of certain projects with certain U.S. agencies, combined with a slightly more stable purchasing environment.

The percentage growth for the government for the first half approached 50% and we could see just continue to see revenue in the vertical due to on-going strategic projects. In summary, Q2 was another good quarter for NetScout, and we are looking forward to a strong second half.

We are excited about NetScout's future and the opportunity we see to build upon the strong results we posted today. The acquisition of Danaher's Communications business will enable us to become an even stronger and more strategic partner to our customers.

Bringing together these two well-respected organizations will merge very complementary technology bases and deep domain expertise. Through this transaction, our company will also gain the size and scale and capabilities to support continued growth.

We have a unique opportunity to take a bold step and strengthen our company in many dimensions and provide us with the runway for a strong revenue growth, higher profit growth, and excellent cash generation for many years to come. In closing, our strategic direction is clear.

We are confident in our prospects for continued success both in the short-term and in the long-term. As always, our success would not be possible without the hard work and tenacity of our employees. So I'd like to thank them for their ongoing commitment and focus. Now, I will turn the call over to Michael..

Thank you, Anil. Turning to the business at hand, as Anil discussed, NetScout continued to successfully grow its business during the second quarter of fiscal year 2015. I'd like to expand on several areas that Anil touched upon. First, I'd like to add to Anil's view on what's happening with our business in the service provider marketplace.

As he mentioned, we continued to work closely with all of our major service provider customers to address both near-term and longer-term requirements.

Our success in this vertical during the past several years reflects positively not only on our product and technology development initiatives but also upon the strategic and tactical investments we've made to broaden the sales, sales engineering, product marketing, and support resources. But design wins and purchasing can take a long time.

The incumbency and installed base that Tektronix has can really help us accelerate our efforts and uncover new opportunities. As we move forward, we are continuing to add incremental resources aimed at driving further adoption of our solutions at our service provider customers.

This includes continuing to enhance our offering in ways that will support new VoLTE services as well as expand our penetration with cable MSOs or multi-systems operators.

In the U.S., for example, major cable companies are embracing IP technology to deliver new services, and this trend plays into the sweet spot of NetScout's experience and core competence.

For example, Cable MSOs are aggressively rolling out carrier-grade Wi-Fi connectivity services to extend beyond traditional fixed environment in an effort to retain existing broadband customers and attract new ones. During the quarter, we won new business with a large cable MSO to help them monitor and manage their Wi-Fi services.

We expect that our investment to further expand our penetration into the cable MSO market will continue to yield tangible results over the coming quarters. In the enterprise, as Anil mentioned, our customer penetration strategy is built largely around leveraging our existing customer base by expanding our value to new users mostly in IT Operations.

nGeniusONE is emerging as a uniquely effective tool to isolate failures in complex IT services in a matter of minutes versus many hours using legacy tools.

This combined with our ability to identify and prevent impending problems make nGeniusONE a valuable asset that helps safeguard the mission-critical business applications of our customers and helps better leverage the element management tools already in place in optimizing the performance of those applications.

I think it is important to remember that nGeniusONE was launched about four quarters ago. Not surprisingly, customers are moving thoughtfully to take advantage of its capabilities in conjunction with their broader IT projects. Feedback on nGeniusONE remains very positive.

Using our solutions, our customers can fix their issues faster, avoid wasting time by finger pointing at other groups, and enhance the overall end-user experience, all of which can help improve ROI and reduce very real business and operational risks.

While nGeniusONE analyzes a growing list of core services and applications, our on-going investment in the unified communications area in particular is being rewarded with increasing customer interest and deal flow.

Healthcare is one industry where the value of our solutions is critical to the quality and speed of care they provide, particularly when it comes to accessing patient records or sharing images during medical procedures.

During the second quarter, we closed several major deals to support customers who are moving to implement voice over IP architectures in healthcare, government, and in other areas.

For example, we won new business with a leading provider of regional roadside assistance services in conjunction with a migration to a new, more cost-effective IP-based infrastructure.

NetScout won this business by demonstrating its ability to monitor SIP-based voice transport traffic, quickly triage application and network performance issues, and provide granular insight into the quality of the end user experience, all while reducing the number of tools that the IT organization relies upon.

We continue to focus on UC because we see increasing customer need across the enterprise and government agencies. Our technology and approach are uniquely suited to these needs, and it is a natural extension for us because these projects are often implemented within the network operations teams or in close cooperation with them.

We also saw strong improvement in the government sector this quarter, as compared to a year ago. A key win involved a major agency acting as an internal provider of IT services to other agencies within the Department of Defense, nGeniusONE is their principal service assurance platform.

We also see additional opportunities to help them better manage their voice, video, mobility, and UC programs in the coming quarters.

This win is an example of how our work in the service provider space has opened new way for NetScout to demonstrate its ability to improve services for large numbers of users, well beyond the scale of a single typical enterprise.

In general, the competitive landscape remains unchanged, in a fairly fragmented enterprise market, with many legacy element management tools used by multiple IT teams to assure service quality and performance in the face of new problems. These include the impact of major IT trends, such as BYOD, Virtualization, Cloud, and SDN.

NetScout's opportunity is to solve these problems faster and better based by using a wholly different approach based on traffic data and our proprietary ASI technology. Finally, I'd like to provide a quick update on NetScout marketing.

As we look forward, we believe that it will be increasingly important to amplify our messages to the marketplace, and this will be certainly critical once we complete the proposed acquisition. We have already taken some important steps in this direction.

For example, we've added to our existing corporate and field marketing teams; and we've engaged a new marketing firm to help us further elevate the NetScout brand. We are also seeking to maximize our presence at Trade Shows and so that we believe can drive lead generation into adjacent market segments.

The outstanding success of our exhibit at the recent Oracle OpenWorld Conference, attended by over 60,000 IT professionals, is a good example of that. Recognition of NetScout in the marketplace continues to grow. In August, we won a number of Stevie awards for having the best telecom and hardware products.

Additionally, we were also notified that NetScout will be included within the Barron's 400 Index for the fifth consecutive year based on our fundamental soundness, growth characteristics, profitability, and overall attractiveness to investors.

In summary, we are proud of our solid results this quarter, and we are staying focused on continuing execution even as we prepare to complete the acquisition of Danaher's communication business.

In addition, I am very excited about NetScout's potential in the marketplace and look forward to working closely with the teams at Tektronix Communications, Arbor Networks, and Fluke Networks once our transaction closes. With that said, let me turn it over to Jean for the financial review..

service providers generated $85 million, or 40% of total revenue; government customers produced $29.7 million, or 14% of total revenue; and our general enterprise customers represented $96.7 million, or 46% of total revenue. Turning to Slide 21, this slide shows our total revenue growth by sector for the first six months of fiscal year 2015.

Reflecting my earlier review of the second quarter and the related detail on product revenue, our total revenue for general enterprise sector is now up 5% on a year-over-year basis, while service provider is now up by 42%. Total revenue in Government is up by 34% on a year-to-date basis.

Turning to Slide 22 for a review of our revenue by geographic region for the first half of fiscal year 2015. For the first half of the year, the revenue mix was 78% domestic and 22% international.

This primarily reflects our ongoing strength with our domestic service provider customers, along with a seasonally slower second quarter in Europe, the overall weaker economic environment in this region that has persisted for some time now, and the relatively early stage of investment in 4G/LTE by carriers outside of North America.

Within our international sales, Europe represented 10% of revenue with 5% for Asia and 7% for the rest of the world. Slide 23 details our balance sheet highlights and free cash flow. We continue to maintain strong liquidity.

At the end of Q2 fiscal 2015, we had invested cash, short-term marketable securities, and long-term marketable securities of $217.3 million. Combined with our current revolver capacity, our total liquidity exceeds $465 million. Financially, we are well positioned to execute on our products and go-to-market strategies.

Our fiscal 2015 free cash flow for the first six months was $24.9 million. This reflects $29 million in cash flow from operations less approximately $4 million in capital expenditures. Our operating cash flow was impacted by changes in working capital, most notably the shipment skew of this quarter along with slightly higher inventory purchases.

During the second quarter of fiscal year 2015, as part of our existing $100 million open market stock repurchase program, we repurchased 250,000 shares of common stock at an average price of $44.83 per share, totaling $11.2 million.

For the fiscal year 2015 to-date, NetScout has repurchased 500,000 shares at an average price of $41.81 per share, totaling $20.9 million. Accounts receivable net of allowances was $49.8 million, down from $60.5 million at the end of fiscal year 2014.

Days sales outstanding were 43 days for the quarter compared to 26 days last quarter and 47 days for the fourth quarter of fiscal year 2014. Inventories were $14.5 million. This is up by $1.9 million since the end of fiscal year 2014.

Our total deferred revenue was $117.6 million representing a $16.3 million decrease from the $133.9 million at the end of March. This decrease is in line with our historical pattern as we see lower levels of renewals in the second quarter.

Turning to our guidance for fiscal year 2015, Slide 23 illustrates our guidance range for revenue and earnings per share. We are reiterating our guidance for FY 2015 for both revenue and earnings per share. Our GAAP and non-GAAP revenue guidance for fiscal year 2015 is $450 million to $465 million yielding a total revenue growth rate of 13% to 17%.

The driver of our revenue growth continues to be our product revenue, which is expected to grow in the range of 18% to 23% for the full fiscal year. Revenue for the first half of fiscal 2015 represents approximately 46% of the mid-point of our top-line guidance.

Similar to last year, we expect the second half of the year to be relatively evenly balanced between the third and fourth quarters, with a slight skew toward the fourth quarter. Our earnings per share guidance range for fiscal year 2015 is $1.74 to $1.81 yielding an EPS growth rate range of 14% to 18%.

As a reminder, the research and development tax credit has not been renewed and this is reflected in our effective non-GAAP tax rate for the fiscal year 2015 of approximately 38%. Our guidance reflects modest leverage in our operating model as we continue to make important investments into our operations in areas such as R&D, sales, and marketing.

Before we conclude the financial portion of our remarks, as Anil mentioned earlier, we will continue our efforts to reach out to our shareholders to arrange calls and meetings to further discuss our recently announced transaction.

We will also plan to participate in several investor conferences during the last couple of months in 2014 including participation in the RBC Capital Conference in New York City on November 11; we will attend the Nasdaq Investor Conference in London on December 3; and we will present at the BMO Technology Investor Conference in New York City on December 10.

That concludes our prepared remarks this morning. Thank you for joining us and we look forward to taking your questions. Stephanie, you can now open the line to questions please..

Thank you. (Operator Instructions). Our first question comes from the line of Scott Zeller with Needham & Company. Your line is open..

Hi. Good morning. Wanted to ask a question about the synergies that you outlined in your remarks. I think you called out 5% of the total cost, which would be COGS and OpEx.

Could you tell us what your thoughts are on OpEx given that it seems that you have a lot of the benefit coming from the gross margin improvement so what are your thoughts about OpEx efficiencies?.

Hi, Scott. So you're correct in that. We have -- as Anil mentioned, we have improved margin significantly and we have very high quality gross margin. So we do anticipate looking at that -- those operations in the first full year of operation and significantly improving gross margins more to the level of our software like margins.

When you go down into operating expenses there are different models at different pieces of the business use, we will look at integrating them. And for one thing right out of the box, we clearly have to provide everybody with information.

So we will be looking to put the organizations on a common enterprise system, which should help us with any kind of redundancies and improve a lot of processes and efficiencies.

Also, as Anil mentioned in his script, we have -- we are very customer focused and we have sales people, as well as support people, as well as a lot of marketing programs that we want to maintain to deliver the continued excellent customer service and relationships that both companies have enjoyed over the last few years or decades.

So to that end, what we're going to be looking at are the programs that are within those things. Things like Trade Shows, overlapping marketing program, really zeroing in and lasering on those types of things, as well as how we best can support all of our customers around the globe. So we will do some of that in the first year.

But we really expect that we will get those synergies as we rationalize the organization more in the second and third year, and then just continuing to go forward. We also have always run a very scalable operating company and we continue to be prudent in our investments in those support areas that are overheads.

So we will continue to maintain our fiscal prudency and just watch costs as we go down to make sure that we can contribute to margins and to gross margins as well..

I think one thing more I want to add Scott is that our experience with Network General, which was also transformative was that in the first year we want - the gross margin improvement, some other things which Jean talked about, are the least disruptive to the revenue and customers.

And so we're going to focus on those things first as we find other synergies in the second year. But regardless we will still be as we talked about we will be accretive in the very first year on this big transaction..

Your next question comes from the line of Mark Kelleher with D.A. Davidson. Your line is open..

Great, and thanks for taking the questions. Yes, another question on the acquisition.

Can you just talk a little bit more about the interaction with Tektronix? That technology particularly I know you've been competing successfully against Tektronix for quite a while, can you just may be give us some more detail on why that technology is important to you and what do you need there, what couldn’t you do yourself?.

Well I think the big -- having a better go-to-market strategy is the biggest reason but you're right that in the lot of the areas I mean there is some overlap in the types of things we do. But we looked at the number of things where we had actually very little overlap.

So for example let's just start with the cases like business intelligence and reporting, CEM System, RAN optimization.

We don't even play in there and with Tektronix acquisition of companies like Arantech in the BIA area, Newfield Wireless in the RAN area, those things are the areas which are going to provide complementary solutions for what we do today.

We have focused more on 4G and while Tektronix has focused on both 3G and 4G, we started -- we have become more aggressive on the 4G VoLTE side, and they have a 3G installed base and when customers are looking for troubleshooting area, which looks at stitching calls between 3G and 4G, and even legacy infrastructure, than having a solution from a single company which can switch their call very easily, creates a more compelling solution for the customer.

So I think we don't -- while we're going to benefit a lot from this, customers are going to benefit more, and in the process we are going to increase our revenue..

Okay, thanks..

Hi, this is Jean, just to add one thing also. As you know NetScout's core competency has always been in IT network and that is where we've been shining, as the service provider have been turning towards IT based network, which is the traditional 4G and LTE.

And also since you followed us you know that we acquired a product a couple of summers ago Accanto, which should address the 3G market also so that we could be more competitive in emerging market, and potentially also take care of any refreshes that might occur over the existing customer base.

That 3G market however because it was a little more ancillary to us we never really fully discussed it in any kind of detail.

But we have reports from Ericson Mobility that will show that the 3G portion of the customer base especially as it moves to emerging rollout -- emerging markets and they rollout continue 3G that market is supposed to grow over the next five years at a CAGR of about 11% to 12%.

So we are really excited about the capabilities that Tektronix within the TekComm platform can give to us..

Next question operator..

Your next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets. Your line is open..

I'm curious on the buyback.

Is there anything in the agreement that stops you guys from maybe perhaps being more aggressive here over the next 10 or 11 months while we wait for the deal to close?.

Hi, Eric. So as you know when we announced on Monday, we said that we would be announcing 62.5 million shares and so we have a combined shareholder, outstanding shareholder base of a 105.

When you start to look through some of the potential financial engineering that we can do over the next few years, we've talked about the tax rate and the opportunity to reduce our effective tax rate. We also will be gaining more than double our cash flow.

So we would have the opportunity to engage in a more aggressive share repurchase program, as you noted, as well as we have a tremendous annuity stream in our service revenue. Our service revenue combined due to the loyalty of our customers continues to grow every year.

We could leverage that service revenue to at least say one-time and then that would give us a lot more capacity to institute a more aggressive share buyback. Within the existing RMT rule you are allowed to buy back approximately 20% of your total outstanding shares over a two-year period.

So as we mentioned on Monday, as we view some of our tax strategies and opportunities as well as we review some of the opportunities that we will have generating increased liquidity, we will look at whether it makes sense to improve our share buyback program..

Right. [Jean] [ph] your response was kind of a post-close response.

I'm wondering pre-close?.

No, pre-close. Clearly the RMT rules are not in effect yet, so no we don't really have any kind of hindrance in buying a share buyback at this point..

Any appetite to do that?.

We're [continuing to evolve] [ph] our strategy..

You liked it at $44; you must love it at $34?.

I'm sorry, could you say that again please?.

You liked it at $44 a share; you must love it at $34 a share?.

We do have a lot of belief in our long-term results and our long-term performance and giving value to shareholders. So without speculating on the stock price we consider that NetScout will continue to deliver over the short-term, medium-term, and long-term..

Thank you. Next question operator..

Your next question comes from the line of Kevin Liu with B. Riley & Co. Your line is open..

Hi, good morning. I guess just with respect to the growth of the acquired or to be acquired businesses, I think Danaher has talked about the TekComm decline for this year.

I was wondering if Arbor and Fluke's have suffered any declines or have been subject to any of the same macro trends that that TekComm's business has seen?.

Anil Singhal:.

:.

Got it. And just given the acquisition and from the timeframe until it closes, I'm wondering how you guys are approaching investments within the business. Are there areas now where you would with either forgo some investments or pay back some of your initial initiatives. Any commentary on that would be helpful..

No, no we're not -- there is no reason for us to because lot other things which we're doing are very complementary.

And so I usually don't see reason we have to be aware of what our plans were and we have to see how we're going to -- re-launch, I mean relaunching our cyber strategy, which, as you know, we were planning to do in the next -- towards the end of the year. And but I don't think it's going to have any impact on the investment we're planning to make.

Michael mentioned, we think we're doing very good but we're not spending enough money on marketing, and we will continue to that effort and that would be even more important as we combine the operations. So that everyone knows that what a great combination is this going to be..

Next question operator?.

Your next question comes from the line of Alex Kurtz with Sterne Agee. Your line is open..

Thanks for taking the questions guys. I just have to go back about Mark's question about Tektronix and (inaudible). Having followed you for a while the discussion about your advantages over Tektronix in the market which some of you guys been a lot of time talking about and obviously this is about half of the business that you're acquiring here.

Still I think investors are wondering outside of the other two products that you're acquiring just looking at Tektronix, is this an installed based acquisition or is there really some kind of future roadmap of specific Tektronix technology that you intend to integrate into what you're selling to the service provider market today.

Because I think that's obviously would be looking at the valuation, what you paid for it a little bit differently in those two different scenarios?.

So I think I might have mentioned in the last meeting that when you're separate you try to have small competitive fights. But when you're combined then you look at the bigger thing.

Bigger thing is how do you get traffic base instrumentation to the market and compete with other players in the element management area, some of whom like Ericson and CISCO could actually become our partner. So yes, we have talked about them as a competitor but we were surprised how little customer overlap was there.

So that was important because if there is lot of customer overlap then we have negative synergy so that was very little.

On top of that, I think we cannot talk about lot of details right now because of all the regulations but there is a very nice way to integrate ASI with some of the stuff, which Tektronix was doing, and so there will be some cross-selling opportunity there.

We mentioned at the outset that as standalone we would have positioned that we do everything but in reality bulk of the business from NetScout comes from monitoring and bulk of their business come from troubleshooting and customers have been looking for integration for these and I think that will be a great value to them.

And lastly, just like this cross-selling opportunity for ASI from NetScout side to Tektronix customers, I think we also have cross-selling opportunities in the RAN optimization, the last mile is something which we have not covered very well. We get from the AM segment portion of Fluke Network.

We get Wi-Fi monitoring and several things like that on the cellular side. On the RAN side, which is very hard to instrument with the Newfield Wireless technology we'll be able to cover that. And finally, in the business intelligence and analytic area they have some good traction.

And in the past network was relying purely on third-party analytics, data consuming ASI and now we'll be able to have our own solution as well..

Your next question comes from the line of Matt Robinson with Wunderlich Securities. Your line is open..

Yes. Thanks for taking my question. On the -- in the -- some of your filings, you talked about debt financing. Can you comment a little bit about the balance sheet you're getting with the transaction? And Jean, I've got my usual depreciation question. And then --.

Okay..

I'd like to understand little bit more about the timeframe and the break up fees as well?.

Jean Bua:.

One of the very good, high quality aspects of NetScout is that we do generate cash flow. As you know, we generated close to a $100 million of cash flow last year. And looking at the balance sheet of the combined businesses, we would expect that we doubled may be to -- we doubled and potentially could increase one-and-a-half time.

So we will have a lot of liquidity and we'll be able to use that liquidity to continue to invest in our product development for our customers, and then continue to invest in potential acquisitions down the road that would enhance any other kind of functionality that we need, as well as invest in marketing programs as Anil mentioned.

I continue to look at our share repartition program..

Yes. So what's the timeframe for the both? And --.

Oh, I'm sorry. I forgot. I'm sorry. I forgot that portion. So as Anil had mentioned, we will be filing a registration statement, a proxy statement with the SEC. For instance, they called out business from Danaher. We have -- they have finished an audit so that we can put those audited statements.

At that time, when we do the S4, you will have clearly three years of past historical P&L performance for the called out piece, as well as balance sheet and cash flows, and you will also have projection for what we base the deal on.

So that is anticipated at the end of the audit, probably to be somewhere -- I think I said on the call on Monday that it would be before the end of 2014. So we probably think it might be the end of November to some time before Christmas. We also have to go through antitrust regulations and we've clearly been looking at both of those pieces.

And then, Danaher also has to file a 4/10, which will go into detail on their businesses. So just to reiterate, we expect that going to SEC, the shareholders owed antitrust in anything, could take us up to say six months. So we think we could close as late as June, the end of our first quarter in fiscal year 2016.

And since it was such a long question and a long answer on my part, let me just go back and reiterate one point. The balance sheets of both of these companies are very strong.

They're both cash free, they're both debt free at this point, and we will be able to increase our liquidity as I had mentioned and more than double what we had did in 2000 -- fiscal year 2014 as a standalone company. And we look forward to reviewing some programs that will be able to add even more value to our shareholders..

Your next question comes from the line of Mark Sue with RBC Capital Markets. Your line is open..

Thank you. Anil, if I look at the combined entity from an OSI stock perspective, the physical transferred upper levels of the OSI stock.

And if I look at your business model beyond the cost of goods improvement wouldn't the mix get better, wouldn't the recurring revenues look better in the future as you move higher up the stock? I'm just kind of looking at the migration of the broad product portfolio from Tektronix all the way up to Oracle?.

Yes. I think we expect that growth rates will be better than -- and that's why we are doing as the average growth rate of the combined business today. And so we see lot of improvements. But on the first year, we'll have to make sure that we don't have any disruptions. We are taking it slowly, making sure that customers are happy.

And so yes that's the goal. I think it's going to be a good growth on a higher base with the combined company..

Okay.

So -- but the -- and the mix should be -- I mean, we are moving higher up the stack in software content, OSI all those things that should help at the recurring revenue?.

So I don't know what you mean by higher stack. We are all the way to layer seven. And so we are already higher up on the stack. I don't know whether you're mentioning that may be control plane focus versus data plane focus.

And we have -- in the voice over LTE areas, we have been more focused on data plane, which is emerging traffic rates and all those stuff. But from an OSI level, from a software level, I think we were both in at all the way to the top level.

Now, from the analytic point of view, I mean there are three kinds of analytics on the same day it occurs, there is troubleshooting type thing, which I think Tektronix was very good and monitoring, which was NetScout was better and focusing more on monitoring side. And we were looking at going into business analytics area.

So if you look at Tektronix, those were the three analytic domains. And they were better in two of them, we were better in one of them, and we're going to invest next year in the second one, which is the business analytics.

And I think now we will have the -- we can use the same data so it's the same dataset to feed into all three application which will be great thing for the customer and which will support for the mission critical nature of a solution..

And if I look at it from your service provider point of view or customer point of view the cable MSOs, the wireless carriers, and also the one online.

Do you see a shift in the purchasing from CapEx to more OpEx in the future does that also shift over the longer-term?.

I think it's very interesting and we have different ways of selling the product, which helps the CapEx versus OpEx. So we have different pricing models today and it's interesting that in the same category some service provider want CapEx is important to other people OpEx is important. We sell our product.

We have two pricing models today already and Tektronix, I believe had something similar, which allows us to use one or the other model which customers prefer. So yes, there is some movement there but we don't think it is going to be disruptive to our business and it's a mixture of requirement it's not one size fits all for everyone..

Okay. That's helpful. Thank you and good luck..

Yes..

Thank you..

(Operator Instructions). Your next question comes from the line of Chad Bennett with Craig-Hallum. Your line is open..

So is there anyway Anil to think about the combined company, what portion of the service provider spend in monitoring, in troubleshooting, what market share the combined company will have kind of post-deal?.

Well, I think first of all, I mean it depends how you define the market. We define the market as total management budget, which includes not just traffic business implementation, but it includes Ericsson, it includes CISCO, it includes business analytic, even some revenue from IBM.

When you look at that this is going to be a small portion of the total I mean, good portion of the total obviously much more than what we have today. And we see that's the primary reason to do this to get the best technology in the market.

We need to compete with non-traditional competitors, which are much bigger scale in size even though we feel we have the better technology and more compelling technology, and that was the goal of nGeniusONE and ASI, but nGeniusONE and ASI technology alone won't have been able to accomplish that.

We needed a scale size and a wider go-to-market strategy, more presence international as well as U.S., and all these assets allows us to achieve that. And that's the main reason for doing.

So if you look at market share in a small niche market of just (inaudible) and packet flow instrumentation, yes, it will be much bigger, but that's not the way to look at, that's not the growth challenge for NetScout or for technology.

Growth challenge is how much portion of the total IT budget we get attributed to the collisions we provide and there, there is massive competition.

In the cyber area, we have big players, in the enterprise area we have big players like CA, HP, and in the service provider area there are bigger players like Ericsson, CISCO, Nokia, Siemens, and all those.

And so when you look at those budgets what's up to us in comparison as standalone companies and I think that's where a lot of the growth prospects are going to be and customers are going to win the process because they're going to get better technology at affordable price..

Okay. And then second question on nGeniusONE in the good momentum, you're seeing on your enterprise business and the growth rate there.

Can you talk about kind of the adoption there, I know initially if obviously the customer was up-to-date on maintenance they would get nGeniusONE and the NPM -- APM capability for a certain capacity, and then the hope was they would expand and that's where you would bring in additional revenue dollars obviously.

It seems like that happening can you just kind of talk about the adoption rate there and kind of where we are and how that's impacting growth?.

Yes so I think just to be frank, adoption rate has been very high but the revenue traction has been little slower than I would have liked, and that we have to recognize that bringing such a new technology how great it is even to existing customer and market and selling the new service adds value proposition than just traditional NPM takes time.

So we are very hopeful for the second half and next year we are doing things on the training and other front to accelerate that but adoption rate is very high.

What I mean by adoption rate is what percentage of our customers are now using nGeniusONE and that was always supposed to be the first phase as you talked about and that's why we created a upgrade path which was easier for people to deal with.

The second phase which is now drive -- used that to drive instrument in other places is slightly slower than I had expected but I think things are getting better and we are hearing a lot of good things from the customers. So yes, it's going to happen. Some of it is already happening but we need more to drive growth, bigger growth in the enterprise.

And again in that area depending on when this acquisition close, we'll have broader access to a customer base in midyear even nGeniusONE could also be used in midyear market.

So, we'll have access to that plus on the international market we'll probably -- will share with you that our business is 20% international in the enterprise also and their business is 40%. And so those are the kind of things which are going to help us sell nGeniusONE, the initial adoption of nGeniusONE with existing customers.

But I see there's a lot of potential for the new customers which will be helped by this combination..

Are there any other questions operator?.

There are no further questions at this time..

Great. Well I'd like to thank everybody for joining us this morning. We appreciate your time and attention and certainly if there is any other questions in regards to the quarter or the acquisition of Danaher's Communications business please give us a call. We look forward to seeing you out on the road. Thank you..

This concludes today's conference call. You may now disconnect..