7 million for the writedown of inventory 1

142, Goodwill and Other Intangible Assets, to initiate an interimgoodwill impairment analysis and wrote off a total of $105.8 million in goodwillduring the second quarter of fiscal 2009. In addition to the non-cash goodwill impairment charge, GAAP operating loss andnet loss for the second quarter of fiscal 2009 includes a non-cash charge of$2.7 million for the write-down of inventory, $1.5 million related torestructuring and $158,000 of share-based compensation expense. Excluding the primarily non-cash charges for the second quarter of fiscal 2009the Company reported a 59 non-GAAP gross margin, 7.7 non-GAAP operatingmargin, $3.0 million of non-GAAP operating income and $1.7 million of non-GAAPnet income, or $0.14 per diluted share. and Asianmarkets, where many customers postponed their spending as the economic outlookworsened." "We entered the low-cost scope space with some uncertainty about futuredevelopments in that market, but we are very pleased with our results to date,"Reslewic said. "Despite a challenging economic environment in the Decemberquarter, we sold 22 percent more oscilloscope units than we did in the sameperiod last year. Our new presence in the low-cost scope market enables us toput LeCroy units in the hands of engineers, students and others involved atlevels of the design process where brand familiarity and loyalty is typicallycreated." "Our Protocol Solutions Group (PSG) revenues increased more than 20 percent fromthe sequential first quarter," said Reslewic.

"We currently have a strong marketposition for PCI Express Gen II and USB 3.0 and in storage protocols, such asSAS and SATA. Our SAS/SATA orders were up 35 percent from the sequential firstquarter. The storage market represents a potentially significant opportunity forPSG as these standards become more widely adopted." "Non-GAAP gross margins increased to 59 percent during the second quarter,"Reslewic said. "This is primarily attributable to improved shipments in theprotocol products and lower manufacturing costs associated with our latesthigh-end products. Our ability to improve gross margins this quarter wasparticularly encouraging considering the unfavorable currency effects in thecurrent quarter." "In anticipation of a weakening demand environment, in the second quarter webegan to take aggressive action to reduce LeCroys cost structure and focus ourbusiness on key growth opportunities," Reslewic said. "As previously announced,we reduced the Companys workforce by 10 percent and terminated several projectsthat we believed would yield limited return on investment.

As a result, LeCroydiscontinued its optical scope product line and a protocol program. In thecurrent quarter, we also cut salaries across the board by 10 percent, reducedvariable compensation and eliminated the Companys 401(k) match plan. All thesecost-reduction initiatives are expected to generate annual cost savings ofapproximately $8 million going forward." Business Outlook and Financial Guidance"We believe that LeCroy is well positioned to weather the current recession,"said Reslewic. "We have significantly trimmed our fixed costs, and expect tomaintain positive non-GAAP operating margins in the low single digits during thedownturn. We also expect strong cash generation as we reduce our inventoryduring the next few quarters.