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Article by DailyStocks_admin    (09-23-08 04:23 AM)

The Daily Magic Formula Stock for 09/23/2008 is IMS Health Inc. According to the Magic Formula Investing Web Site, the ebit yield is 10% and the EBIT ROIC is >100 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


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BUSINESS OVERVIEW

IMS is the leading global provider of market intelligence to the pharmaceutical and healthcare industries. We offer leading-edge market intelligence products and services that are integral to our clients' day-to-day operations, including portfolio optimization capabilities; launch and brand management solutions; sales force effectiveness innovations; managed markets and consumer health offerings; and consulting and services solutions that improve ROI and the delivery of quality healthcare worldwide. Our information products are developed to meet our clients' needs by using data secured from a worldwide network of suppliers in more than 100 countries. Our key information products include:


Sales Force Effectiveness to optimize sales force productivity and territory management;


Portfolio Optimization to provide clients with insights into market opportunity and business development assessment; and


Launch, Brand Management and Other to support client needs relative to market segmentation and positioning, life cycle management for prescription and consumer health pharmaceutical products and health economics and outcomes research offerings.

Within these key information products, we provide consulting and services that use in-house capabilities and methodologies to assist pharmaceutical clients in analyzing and evaluating market trends, strategies and tactics, and to help in the development and implementation of customized software applications and data warehouse tools.

IMS was incorporated under the laws of the State of Delaware in 1998 and we have operations in more than 100 countries.

Segment financial information, including financial information about domestic and foreign generated revenue, is set forth in Note 18 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Additional information regarding changes to and the development of our business is contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in Notes 1, 2, 3, 4, 5, 6 and 15 to the Consolidated Financial Statements in Part II, Items 7, 7A and 8 of this Annual Report on Form 10-K.

IMS

We provide critical business intelligence, including information, analytics and consulting services to the pharmaceutical and healthcare industries worldwide. Our market intelligence products and services serve our clients' needs which we group into three broad areas: sales force effectiveness, portfolio optimization, and launch, brand management and other. We provide information services covering more than 100 countries and maintain offices in 75 countries on six continents, with approximately 63% of our total 2007 revenue generated outside the United States.

OUR PRODUCTS AND SERVICES

SALES FORCE EFFECTIVENESS OFFERINGS. Our Sales Force Effectiveness Offerings represented approximately 46% of our worldwide revenue in 2007. Using a total solutions approach, IMS Sales Force Effectiveness drives smart business decisions, shapes sales management and marketing strategies, and supports sales processes. Offering actionable insight for markets worldwide, services within the Sales Force Effectiveness business area provide in-depth intelligence that supports the planning, development and execution of critical business processes, including segmentation, sales force sizing and deployment, performance assessment and compensation, and territory management.

Sales Force Effectiveness Offerings provide our clients with valuable insight as to which physicians are seeing significant numbers of patients that are likely to benefit from a specific therapy. These innovative solutions facilitate the optimization of market share and revenue potential using sub-national prescription patterns, easy-to-use access tools, and an array of consulting services. These capabilities enable fast and effective communication of vital information that can accelerate meaningful innovation, public safety news alerts in the event of inappropriate prescribing and drug recalls, as well as the appropriate distribution of samples. IMS Sales Force Effectiveness informs critical business decisions and optimizes overall performance. Our Sales Force Effectiveness Offerings provide the in-depth information, market intelligence and analysis that enhance the efficient allocation of resources in a manner that reduces cost and saves valuable time.

Our principal Sales Force Effectiveness Offerings are as follows:


Sales Territory Reporting Services. Sales territory reporting is the principal sales management service that we offer to our pharmaceutical clients. Sales territory reports can be precisely tailored for each client and measure the sales of a client's own products and those of competitors within specified geographical configurations. These reports are designed to provide marketing and sales managers with a reliable measurement of each salesperson's activity and effectiveness in his or her sales territory. Our sales territory reporting services cover more than 31 countries and are used by our customers for applications such as sales-force compensation, resource allocation, territory alignment, market analyses and distribution management. We make reports available to clients in a variety of frequencies, such as on a weekly, monthly and quarterly basis.


Prescription Tracking Reporting Services. Our prescription tracking reporting services are designed to monitor prescription activity and to track the movement of pharmaceutical products out of retail channels. Prescription tracking services are used by pharmaceutical companies to facilitate product marketing at the prescriber level. In the United States, our Xponent® service monitors prescription activity from retail pharmacies, long-term care and mail service pharmacies using a patented statistical methodology to project the prescription activity of nearly 1.4 million individual prescribers on a weekly and monthly basis. Xponent is available in 6 European countries. The European Xponent database is built from prescription data collected from retail pharmacies and coding centers, which are linked to the geographical area in which the prescription was written. We also offer Early View™, a sales optimization solution, providing weekly prescriber level activity, highlighting competitive prescribing trends for clients' key prescribers directly to clients' sales representatives electronically.


Sales & Account Management and Other Consulting & Services. Our Sales & Account Management practice focuses on helping customers assess the effectiveness of their sales strategies and better design and deploy their sales forces. Using evidence-based research, our offerings in this practice help clients better segment their customer base, determine the optimal size and structure of their sales force based on that segmentation, and design call plans that optimally deploy the various sales resources across channels to better meet their customers' needs and increase their sales force effectiveness. Our Information Management practice helps clients organize, integrate, warehouse and analyze valuable data assets from multiple sources. We also provide Client Services within this business line. Along with product set-up, installation and implementation, Client Services provides customer training and a variety of ongoing, post-sales services.

PORTFOLIO OPTIMIZATION OFFERINGS. Portfolio Optimization Offerings represented approximately 29% of our worldwide revenue in 2007. IMS Portfolio Optimization provides customers with the intelligence and tools to identify and optimize pharmaceutical product portfolios, including currently marketed products and the new product pipeline. Providing a comprehensive range of offerings, Portfolio Optimization enables customers to evaluate, assess, understand, and implement strategies and tactics to improve bottom-line performance and set the course for the future. Integrating prescriptions, sales, disease/treatment, and industry intelligence, Portfolio Optimization services provide a comprehensive picture of the worldwide market. From a national viewpoint down to regional and local level data, customers can complete a thorough market analysis, exploring all options to set the pace for brand leadership. Using in-depth business intelligence, analysis and forecasting, IMS offerings provide customers with the facts, interpretation and guidance to make the best portfolio optimization decisions.

Our principal Portfolio Optimization Offerings include the following:


Pharmaceutical Audits. These audits measure the sale of pharmaceutical products into pharmacies, supplemented in some countries by data collected from dispensing physicians, retail chains and discount stores. These audits contain data projected to national estimates, showing product sales by therapeutic class broken down by package size and dosage form. We publish pharmaceutical audits covering approximately 80 countries.


Medical Audits. These audits are based on information collected from panels of practicing office-based physicians and contain projected national estimates of the number of consultations for each diagnosed disease with details of the therapy prescribed. These audits also analyze the use physicians make of individual drugs by listing the diseases for which they are prescribed, the potential therapeutic action the physician is expecting, other drugs prescribed at the same time, and estimates of the total number of drugs used for each disease. We publish medical audits covering over 40 countries.


Hospital Audits. These audits contain data projected to national and regional estimates and show the sale of pharmaceutical products to hospitals by therapeutic class. Related reports provide audits of laboratory diagnostic supplies, hospital supplies and hospital records. We publish hospital audits covering approximately 50 countries.


Prescription Audits. These audits contain projected national estimates of the rate at which drugs move out of the pharmacy and into the hands of the consumer, and measure both what is prescribed by physicians and what is actually dispensed at the pharmacy. We publish prescription audits covering approximately 10 countries.


MIDAS® Services. MIDAS is an on-line multinational integrated data analysis tool that harnesses our worldwide databases and is used by the pharmaceutical industry to assess and utilize global pharmaceutical information and trends in multiple markets. Our MIDAS Quantum offering gives clients on-line access to pharmaceutical, medical, promotional and chemical data that we compile. Using MIDAS Quantum, our clients are able to view information from the national databases compiled by us and produce statistical reports in the format required by the client. MIDAS contains information covering more than 70 countries.


Other Portfolio Optimization Reports. These include Market Research Publications including the Pharmaceutical World Review™; personal care reports, which estimate the sale of medical surgical device product purchases; and reports on bulk chemical shipments and molecules for research and development. We have developed, in certain countries, disease and treatment information at the patient level (in which information is not identifiable at the individual patient level) that gives participants in the healthcare industry new insights into the treatment of diseases. The availability, scope and frequency of the foregoing reports vary on a country-by-country basis.


Consulting & Services. Consultants in our Management Consulting group bring a unique mix to management of complex portfolios with deep expertise in key therapies and all aspects of pharmaceutical strategies. Product and Portfolio Strategy leverages the best cross functional understanding of scientific and commercial trends, deep competencies in decision theory and portfolio analysis and industry thought leadership to help clients make strategic decisions. We help clients value difficult-to-value assets, gain clarity on a complex mix of decisions with a focused view of strategy with emphasis on alternatives and risks in the face of uncertainty.

LAUNCH, BRAND MANAGEMENT AND OTHER OFFERINGS. Launch, Brand Management and Other Offerings represented approximately 25% of our worldwide revenue in 2007. Launch and Brand Management Offerings combine information, analytical tools and consulting and services to address client needs relevant to the management of each stage of the lifecycle of their pharmaceutical brands. The areas covered include: brand planning, which helps clients with market assessment and forecasting, market segmentation and product positioning; pricing & market access, which helps clients to effectively price and drive market access for their products as well as assess the health economics and real world health outcomes associated with treatment pathways; promotion management, which helps clients measure, assess effectiveness and optimize promotion investment, channel mix and messaging; and, performance management, which helps clients measure diagnosis and optimization for new product launches and in-line brands.

The principal offerings under Launch and Brand business line include:


Promotional Audits and Promotion Management Consulting. Our promotional audits contain national estimates of pharmaceutical promotional activities for individual branded products, including sales-force promotion and journal and mail advertising, based on information received from panels of physicians and from monitoring medical journals and direct mail. In the United States, spending on direct-to-consumer advertising is also measured. IMS currently publishes promotional audit reports covering over 20 countries—over 90% of the promoted markets—and expects to offer audits in approximately 40 countries by year-end 2008. This evidential information is used by our consulting teams to help clients evaluate and optimize the allocation and effectiveness of their promotional messages, mix and delivery around the globe.


Pricing and Market Access Consulting. This portfolio of offerings has two main components, both of which provide clients with critical, relevant insights needed to maximize the lifetime value of their brands and leverage the deep and rich information assets of IMS and, in particular, our longitudinal anonymized patient level data ("APLD") information.


Health Economics and Outcomes Research Offerings. Our Health Economics and Outcomes Research Offerings help clients demonstrate the value of their medicines using our suite of evidence-based health economic evaluations and real world outcomes on a globally consistent basis. Clients have access to our global APLD databases which are used to support product evaluations and help them maximize market access.


Pricing and Reimbursement Offerings. Through our consulting teams, we help clients to achieve optimal reimbursed prices for new products, ensuring the shortest timeframe to market, which contribute to rapid and broad market penetration.


Oncology Analyzer and Consulting. Our Oncology Analyzer audit collects longitudinal patient information regarding the diagnosis and treatment in the critical area of Oncology across the major pharmaceutical markets. We offer Oncology Analyzer in 10 markets and will continue to expand our geographic coverage through 2009. This information helps clients understand markets, treatment patterns and patient opportunities and is used by clients and by our consulting teams to help clients plan and execute successful market entry and life cycle management strategies for their Oncology franchises.


Forecasting Portfolio. Our forecasting portfolio includes both syndicated and customizable, single or multi-country forecasts of 'demand' and/or market performance for individual brands or therapy categories. These offerings bring together extensive analytical and methodological expertise from our consulting teams with the rich global information assets of IMS to provide clients with accurate and long-term views of their portfolios.

We also provide other products and services in the following areas:


Managed Markets. Our Managed Markets Offerings provide an array of information to quantify the effects of managed markets on the pharmaceutical and healthcare industries. Managed Markets Offerings are used by clients to assist in evaluating the impact of managed markets on the pharmaceutical marketplace and in enhancing the performance of their products through better contracting strategies, formulary management and tracking, plan performance tracking and monitoring plan relationships with organizations, such as large medical groups, that may influence prescribing behavior. The types of reports include measurement of prescriptions at the plan level, formulary assessment and tracking, and tracking of prescription payment by type, such as cash, Medicaid or third-party payment. This service is available both in the United States and Canada. In addition, to address emerging Medicare needs in the United States, we make the following services available to our clients: strategic consulting, tactical consulting, rebate validation and performance evaluation. IMS also provides services that assist pharmaceutical clients with drug rebate data validation and adjudication of Managed Care and Medicare Part D contracts.


Consumer Health. Our consumer health services provide detailed product movement, market share and pricing information for over-the-counter, personal care, patient care and nutritional products. Consumer Health Offerings assist over-the-counter and pharmaceutical manufacturers in understanding consumer purchasing dynamics and promotional impact, examining and assessing segmentation and sales force management, strategic business planning, market opportunity and performance management. We publish reports on the global consumer health market, with audited information covering approximately 30 countries, and provide related services. PharmaTrend, our tracking service for consumer purchases of healthcare products, is available in over 10 European countries.


Consulting & Services. We provide evidence-based solutions that allow our clients to make informed business decisions. Such solutions include: Pricing & Market Access, formulating strategies for product pricing, reimbursement, and market access; Product & Portfolio Development, providing solutions for strategic issues throughout the product lifecycle and Promotion Management, assisting our clients in optimizing brand or franchise promotion spending and messaging.

OUR DATA SUPPLIERS

Over the past five decades, we generally have developed and maintained strong relationships with our data suppliers in each market in which we operate. We have historical connections with many of the relevant trade associations and professional associations, including for example, in the United States, where we have been designated as a database licensee by the American Medical Association (referred to in this document as AMA) for use and sublicensing of the AMA's physician database. As the supply of pharmaceutical data is critical to our business, we devote significant human and financial resources to our data collection efforts. OUR CUSTOMERS

Sales to the pharmaceutical industry account for approximately 80% of our revenue. All major pharmaceutical and biotechnology companies are our customers, and many of these companies subscribe to reports and services in several countries. Our customer base is broad in scope and enables us to avoid dependence on any single customer. None of our customers accounted for more than 10% of our gross revenues in 2007, 2006 or 2005.

OUR COMPETITION

While no competitor provides the geographical reach or breadth of our services, we generally compete in the countries in which we operate with other information services companies, as well as with the in-house capabilities of our customers. Generally, competition has arisen on a country-by-country basis. In Europe, certain of our services compete with those offered by competitors such as Taylor Nelson and Cegedim in various European countries, in addition to competition from smaller niche competitors in various local markets. In the United States, certain of our sales management services, including our sales territory and prescription tracking reports, compete with the offerings of various companies, particularly Wolters Kluwer. Also, various companies compete with us in the United States with respect to our market research services, including Verispan, LLC. Our consulting and services businesses compete with various consulting firms around the world. Service, quality, coverage and speed of delivery of information services and products are the principal differentiators in our markets.

OUR INTELLECTUAL PROPERTY

We create, own and maintain a wide array of intellectual property assets which, in the aggregate, are of material importance to our business. Our intellectual property assets include patents and patent applications related to our innovations, products and services; trademarks related to our brands, products and services; copyrights in software and databases; trade secrets relating to data processing, statistical methodologies, editing and bridging techniques, business rules and other aspects of the IMS business; and other intellectual property rights and licenses of various kinds. We are licensed to use certain technology and other intellectual property rights owned and controlled by others, and similarly, other companies are licensed to use certain technology and other intellectual property rights owned and controlled by us.

We seek to protect our intellectual property assets through patent, copyright, trade secret, trademark and other laws of the United States and other jurisdictions, and through confidentiality procedures and contractual provisions. A patent generally has a term of twenty years from the time the full patent application is filed. As IMS builds a patent portfolio over time, the terms of individual patents will vary. While patents can help maintain the competitive differentiation of certain products and services and maximize the return on research and development investments, no single patent is in itself essential to the IMS business as a whole or any of our principal business segments. Further, in order to replace expiring patents and licenses or replace obsolete intellectual property, we obtain new intellectual property through a combination of our ongoing research and development activities, acquisitions of other companies and licensing of intellectual property from third parties. We enter into confidentiality and invention assignment agreements with employees and contractors, and non-disclosure agreements with third parties with whom we conduct business, in order to secure ownership rights to, limit access to, and restrict disclosure of our proprietary information.

The technology and other intellectual property rights owned and licensed by us are of importance to our business, although our management believes that our business, as a whole, is not dependent upon any one intellectual property or group of such properties. We consider the IMS trademark and related names, marks and logos to be of material importance to our business, and we have registered these trademarks in the United States and other jurisdictions and aggressively seek to protect them.

The names of our products and services referred to in this document are trademarks, service marks, registered trademarks or registered service marks owned by or licensed to us.

CEO BACKGROUND

DAVID R. CARLUCCI. Mr. Carlucci, age 53, has served as a Director and as Chairman, Chief Executive Officer and President of IMS since April 2006, and as a Director and as Chief Executive Officer and President from January 2005 until April 2006. From October 2002 until January 2005, he was President and Chief Operating Officer of IMS. From January 2000 until January 2002, Mr. Carlucci was General Manager, IBM Americas, which comprises all of IBM's sales and distribution operations in the United States, Canada and Latin America. From January 1998 to January 2000, he was General Manager, IBM's S/390 Division. From February 1997 to January 1998, Mr. Carlucci was Chief Information Officer for IBM. Mr. Carlucci is also a director of MasterCard, Inc.

CONSTANTINE L. CLEMENTE. Mr. Clemente, age 70, has served as a Director of IMS since December 2001. Since September 2002, Mr. Clemente has engaged in a number of personal investment and major non-profit activities. From August 2002 until September 2002, he provided consulting services to Pfizer, Inc. Mr. Clemente retired from Pfizer, Inc. in August 2002. From May 1999 until August 2002, he was Executive Vice President—Corporate Affairs; Secretary and Corporate Counsel of Pfizer. From 1992 until May 1999, Mr. Clemente served as Senior Vice President—Corporate Affairs; Secretary and Corporate Counsel of Pfizer. Mr. Clemente joined the legal division of Pfizer in 1964 and served Pfizer in a number of domestic and international positions after that time.

KATHRYN E. GIUSTI. Ms. Giusti, age 49, has served as a Director of IMS since February 2002. Since March 2006, she has served as Chief Executive Officer, and from January 1998 until March 2006, she served as the President, of the Multiple Myeloma Research Foundation, a non-profit organization aimed at funding research for and advancing awareness of multiple myeloma. She is also Chief Executive Officer of the Multiple Myeloma Research Consortium, a collaboration of leading myeloma research institutions dedicated to accelerating drug development through innovative research efforts. From 1992 through March 1997, she worked for G.D. Searle & Company, a subsidiary of Pharmacia Corporation, where she most recently served as Executive Director, Worldwide Arthritis Franchise.

M. BERNARD PUCKETT. Mr. Puckett, age 63, has served as a Director of IMS since June 1998. From August 2002 until September 2007, Mr. Puckett served as Chairman of the Board of Openwave Systems, Inc. Mr. Puckett has been a private investor since January 1996. He previously held the position of President and Chief Executive Officer of Mobile Telecommunication Technologies Corporation, a telecommunications firm, from May 1995 until January 1996. In addition, he served as President and Chief Operating Officer of that firm from January 1994 until May 1995. Mr. Puckett also serves as a director of Direct Insite Corporation and Skilled Healthcare Group, Inc.

JOHN P. IMLAY, JR. Mr. Imlay, age 71, has served as a Director of IMS since June 1998. Mr. Imlay has been Chairman of Imlay Investments, an Atlanta-based private venture capital investment firm, since 1990. From January 1990 until November 1996, Mr. Imlay was Chairman of Dun & Bradstreet Software Services, Inc., a software company, and he served as Principal Executive Officer of Dun & Bradstreet Software Services, Inc. from January 1990 to January 1993 and as President of that company from January 1990 until March 1992.

H. EUGENE LOCKHART. Mr. Lockhart, age 58, has served as a Director of IMS since June 1998. Since May 2005, Mr. Lockhart has been an Operating Partner of Diamond Castle Holdings, LLC, a private equity investment firm, and from February 2003, a Venture Partner for Oak Investment Partners, a private equity investment firm. From February 2000 until February 2003, Mr. Lockhart was President and Chief Executive Officer of NewPower Holdings, Inc., a provider of energy and related services. Prior to joining NewPower Holdings Inc., Mr. Lockhart served at AT&T Corporation as President of Consumer Services from July 1999 until February 2000 and as Executive Vice President and Chief Marketing Officer from February 1999 until June 1999. From April 1997 until October 1998, Mr. Lockhart was President, Retail, of Bank of America Corporation, a financial services firm, and from March 1994 until April 1997, he served as President and Chief Executive Officer of MasterCard International, Inc., a credit card company. Mr. Lockhart also serves as a director of the following public companies: Asset Acceptance Capital Corp., Huron Consulting Group Inc. and RadioShack Corporation.

JAMES D. EDWARDS. Mr. Edwards, age 64, has served as a Director of IMS since October 2002. He retired in 2002 as Managing Partner—Global Markets, for Arthur Andersen LLP, a position he had held since 1998. Mr. Edwards began his career with Arthur Andersen in 1964 and served in several positions after that time. Mr. Edwards is also a director of the following public companies: Cousins Properties, Inc., Crawford & Company, Huron Consulting Group Inc. and Transcend Services, Inc.

WILLIAM C. VAN FAASEN. Mr. Van Faasen, age 59, has been a Director of IMS since June 1998. Mr. Van Faasen has served as Lead Director of IMS since February 2006. On December 31, 2007, Mr. Van Faasen retired from Blue Cross and Blue Shield of Massachusetts, a health insurance firm in Boston, Massachusetts, where he served as Chairman of the Board since July 2005. From February 2004 until July 2005, he served as Chairman and Chief Executive Officer; from March 2002 until February 2004, he was Chairman, President and Chief Executive Officer and from September 1992 until March 2002, he was President and Chief Executive Officer, of Blue Cross and Blue Shield of Massachusetts. Mr. Van Faasen is also a director of Liberty Mutual Insurance Company and NSTAR.

BRET W. WISE. Mr. Wise, age 47, has been a Director of IMS since December 2006. Since January 2007, Mr. Wise served as Chairman, Chief Executive Officer and President of Dentsply International Inc., a global medical device company located in York, Pennsylvania. Since August 2006, he has served as a director of Dentsply International. From January 2006 to January 2007, he was President and Chief Operating Officer, from January 2005 to January 2006, he was Executive Vice President, and from December 2002 until January 2005, he was Senior Vice President and Chief Financial Officer of Dentsply International Inc. Mr. Wise was Senior Vice President and Chief Financial Officer of Ferro Corporation of Cleveland, Ohio, a global chemical company from June 1999 to November 2002; Vice President and Chief Financial Officer of WCI Steel, Inc., of Warren, Ohio from August 1994 to June 1999 and prior to June 1994 was a partner with the global accounting firm KPMG.

MANAGEMENT DISCUSSION FROM LATEST 10K

Executive Summary

OUR BUSINESS

IMS Health Incorporated ("we," "us" or "our") is the leading global provider of market intelligence to the pharmaceutical and healthcare industries. We offer leading-edge market intelligence products and services that are integral to our clients' day-to-day operations, including portfolio optimization capabilities; launch and brand management solutions; sales force effectiveness innovations; managed markets and consumer health offerings; and consulting and services solutions that improve ROI and the delivery of quality healthcare worldwide. Our information products are developed to meet client needs by using data secured from a worldwide network of suppliers in more than 100 countries. Key information products include:


Sales Force Effectiveness to optimize sales force productivity and territory management;


Portfolio Optimization to provide clients with insights into market opportunity and business development assessment; and


Launch, Brand Management and Other to support client needs relative to market segmentation and positioning, life cycle management for prescription and consumer health products and health economics and outcomes research offerings.

Within these business lines, we provide consulting and services that use in-house capabilities and methodologies to assist pharmaceutical clients in analyzing and evaluating market trends, strategies and tactics, and to help in the development and implementation of customized software applications and data warehouse tools.

We operate in more than 100 countries.

We manage on a global business model with global leaders for the majority of our critical business processes and accordingly have one reportable segment.

We believe that important measures of our financial condition and results of operations include operating revenue, constant dollar revenue growth, operating income, constant dollar operating income growth, operating margin and cash flows.

PERFORMANCE OVERVIEW

Operating revenue grew 11.9% to $2,192,571 in 2007 compared to $1,958,588 in 2006. The increase in our operating revenue resulted from growth in revenue in all three of our business lines. Our operating income decreased 11.5% to $393,279 in 2007 compared to $444,186 in 2006. The decline in operating income was a result of increased operating revenue, offset by increases in severance, impairment and other charges and selling and administrative expenses, as discussed below. Our net income was $234,040 in 2007 compared to $315,511 in 2006, due to the Non-Operating Loss, net items discussed below and certain tax items as discussed in Note 12 to the Consolidated Financial Statements. Our diluted earnings per share of Common Stock was $1.18 for 2007, a $0.35 per share decrease compared with 2006.

RESULTS OF OPERATIONS

RECLASSIFICATIONS. Certain prior-year amounts have been reclassified to conform to the 2007 presentation.

REFERENCES TO CONSTANT DOLLAR RESULTS. We report results in U.S. dollars but we do business on a global basis. Exchange rate fluctuations affect the rate at which we translate foreign revenues and expenses into U.S. dollars and have important effects on our results. In order to illustrate these effects, the discussion of our business in this report sometimes describes the magnitude of changes in constant dollar terms. We believe this information facilitates a comparative view of business growth. In 2007, the U.S. dollar was generally weaker against other currencies as compared to 2006. As a result, growth at constant dollar exchange rates was generally lower than growth at actual currency exchange rates. See "How Exchange Rates Affect Our Results" below for a more complete discussion regarding the impact of foreign currency translation on our business.

OPERATING INCOME

Our operating income for 2007 decreased 11.5% to $393,279 from $444,186 in 2006. The change was due to the increase in our operating revenue, offset by increases in severance, impairment and other charges, operating costs of Information and Analytics ("I&A") driven by increased costs of data, selling and administrative expenses driven by investments in consulting and services capabilities and the absence of merger costs. Absent the impact of 2007 severance, impairment and other charges, and 2006 merger costs, our non-GAAP operating income increased by 7.1% at reported exchange rates and 5.8% in constant dollar terms (see "Reconciliation of U.S. GAAP Operating Income to Non-GAAP Operating Income" at the end of this Item 7).

Our operating income for 2006 increased 5.6% to $444,186 from $420,820 in 2005. The change was due to the increase in our operating revenue, offset by increases in our operating costs of I&A, direct and incremental costs of Consulting and Services ("C&S") and selling and administrative expenses driven by increased cost of data, investments in consulting and services capabilities, the adoption of Statement of Financial Accounting Standards ("SFAS") No. 123R (revised 2004), "Share Based Payment," ("SFAS 123R") and decreased merger costs, as discussed below. Excluding the effects of our adoption of SFAS 123R and merger costs, our non-GAAP operating income increased 11.7% on a reported basis and 11.5% in constant dollar terms.
OPERATING REVENUE

Our operating revenue for 2007 grew 11.9% to $2,192,571 from $1,958,588 in 2006 and grew 11.6% in 2006 to $1,958,588 from $1,754,791 in 2005. On a constant dollar basis our operating revenue growth was 8.1% in 2007 and 11.1% in 2006. The increases in our operating revenue resulted from growth in revenue in all three of our business lines, together with the effect of currency translation. On a constant dollar basis, acquisitions completed in 2007 and 2006 contributed 2.1 percentage points of our operating revenue growth during 2007, while acquisitions completed in 2006 and 2005 contributed 2.3 percentage points of our operating revenue growth during 2006.


Sales Force Effectiveness: The Americas contributed more than one-half and Asia Pacific contributed more than one-quarter to the revenue growth in 2007. The Americas, EMEA and Asia Pacific regions contributed about equally to the revenue growth in 2006.


Portfolio Optimization: The Americas and EMEA both contributed about one-half to the revenue growth in 2007. EMEA contributed more than one-half and the Americas contributed about one-quarter to the growth during 2006.


Launch, Brand Management and Other: The Americas contributed more than one-half and EMEA contributed more than one-third to the revenue growth in 2007. The Americas contributed more than three-quarters toward the growth in 2006.

C&S revenue, as included in the business lines above, was $482,366 in 2007, up 34.2% from $359,525 in 2006 (up 29.1% on a constant dollar basis). Approximately one-third of the C&S revenue growth for 2007 was attributable to acquisitions completed in 2007 and 2006. C&S revenue was $359,525 in 2006, up 30.0% from $276,653 in 2005 (up 28.5% on a constant dollar basis). More than one-third of the 2006 C&S revenue growth was attributable to acquisitions completed in 2006 and 2005.

OPERATING COSTS OF INFORMATION AND ANALYTICS

Operating costs of I&A include costs of data, data processing and collection and costs attributable to personnel involved in production, data management and delivery of our I&A offerings.

Our operating costs of I&A grew 9.3% to $721,429 in 2007 from $659,841 in 2006. In 2006, our operating costs of I&A grew 9.6% to $659,841 from $602,044 in 2005.


Foreign Currency Translation: The effect of foreign currency translation increased our operating costs of I&A by approximately $29,000 in 2007 as compared to 2006. The effect of foreign currency translation increased our operating costs of I&A by approximately $2,000 for 2006 as compared to 2005.


SFAS 123R: The effect of the adoption of SFAS 123R increased our operating costs of I&A by approximately $4,000 in 2006 as compared to 2005 (see Note 11 to our Consolidated Financial Statements).

Excluding the effect of the change due to foreign currency translation, our operating costs of I&A grew 4.9% in 2007 compared to 2006. Excluding the effect of SFAS 123R and the change due to foreign currency translation, our operating costs of I&A grew 8.6% in 2006 as compared to 2005.


Data: Data costs increased by approximately $35,000 in 2007 as compared to 2006. Data costs increased by approximately $32,000 in 2006 as compared to 2005.


Production, Client Services and Other: Production, client services and other costs decreased by approximately $2,000 in 2007 compared to 2006. Production, client services and other costs increased by approximately $20,000 in 2006 compared to 2005.

DIRECT AND INCREMENTAL COSTS OF CONSULTING AND SERVICES

Direct and incremental costs of C&S include the costs of consulting staff directly involved with delivering revenue-generating engagements, related accommodations and the costs of primary market research data purchased specifically for certain individual C&S engagements. Direct and incremental costs of C&S do not include an allocation of direct costs of data that are included within operating costs of I&A.

Our direct and incremental costs of C&S grew 25.5% to $237,066 in 2007 from $188,939 in 2006. Our direct and incremental costs of C&S grew 20.3% to $188,939 in 2006 from $157,045 in 2005.


Foreign Currency Translation: The effect of foreign currency translation increased our operating costs of C&S by approximately $11,000 in 2007 as compared to 2006. The effect of foreign currency translation increased our operating costs of C&S by approximately $2,000 for 2006 as compared to 2005.


SFAS 123R: The effect of the adoption of SFAS 123R increased our operating costs of C&S by approximately $2,000 in 2006 as compared to 2005 (see Note 11 to our Consolidated Financial Statements).

Excluding the effect of the change due to foreign currency translation, our operating costs of C&S grew 19.7% in 2007 compared to 2006. Excluding the effect of SFAS 123R and the change due to foreign currency translation, our operating costs of C&S grew 17.5% in 2006 as compared to 2005.


C&S costs increased by approximately $37,000 in 2007 as compared to 2006 and approximately $28,000 in 2006 as compared to 2005 due to increased labor, accommodations and primary market research data expense, all directly related to C&S revenue growth.


EXTERNAL-USE SOFTWARE AMORTIZATION

Our external-use software amortization charges represent the amortization associated with software we capitalized under the provisions of SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." Our external-use software amortization charges grew 12.3% to $48,609 in 2007 from $43,297 in 2006 due to increased software amortization associated with new products. Our external-use software amortization charges grew 10.6% to $43,297 in 2006 from $39,142 in 2005 due to increased software amortization associated with new products.

SELLING AND ADMINISTRATIVE EXPENSES

Our selling and administrative expenses consist of the expenses attributable to sales, marketing and administration, including human resources, legal, management and finance. Our selling and administrative expenses grew 15.4% in 2007, to $625,850 from $542,524 in 2006. Our selling and administrative expenses grew 19.9% in 2006, to $542,524 from $452,331 in 2005.


Foreign Currency Translation: The effect of foreign currency translation increased our selling and administrative expenses by approximately $26,000 for 2007 as compared to 2006. The effect of foreign currency translation increased our selling and administrative expenses by approximately $4,000 for 2006 as compared to 2005.


SFAS 123R: The effect of the adoption of SFAS 123R increased our selling and administrative expenses by approximately $33,000 in 2006 as compared to 2005 (see Note 11 to our Consolidated Financial Statements).

Excluding the effect of the change in foreign currency translation, our selling and administrative expenses grew 10.6% in 2007 compared to 2006. Excluding the effect of SFAS 123R and the change due to foreign currency translation, our selling and administrative expenses grew 11.6% in 2006 as compared to 2005.


Sales and Marketing: Sales and marketing expense increased by approximately $17,000 in 2007, compared to 2006 and in 2006, compared to 2005 to support operating revenue growth.


Consulting: Consulting and services expenses increased by approximately $43,000 in 2007, compared to 2006 to support growth. Consulting and services expenses increased by approximately $28,000 in 2006, compared to 2005 to support growth.


Administrative and Other: Administrative and other expenses decreased by approximately $3,000 in 2007, compared to 2006. Administrative and other expenses increased by approximately $8,000 in 2006, compared to 2005 to support growth.

DEPRECIATION AND OTHER AMORTIZATION

Our depreciation and other amortization charges increased 5.2% to $77,648 in 2007 from $73,785 in 2006, due to higher internal-use software amortization. Our depreciation and other amortization charges increased 12.7% to $73,785 in 2006 from $65,481 in 2005 due to higher amortization of intangible assets resulting from acquisitions made during 2005 and 2006, and increased internal-use software amortization.

SEVERANCE, IMPAIRMENT AND OTHER CHARGES

During the fourth quarter of 2007, we recorded an $88,690 pretax charge for severance, impairment and other charges, related to a plan to streamline the business. The charge consists of termination benefits for approximately 1,070 employees worldwide as well as asset impairment charges and related contract payments to be incurred with no future economic benefit based on our decision to abandon certain products in our EMEA region. See below and Note 6 to our Consolidated Financial Statements.

MERGER COSTS

During 2005, we incurred merger costs of $17,928 for professional fees in connection with a proposed merger (which was ultimately terminated) with The Nielsen Company ("Nielsen"), formerly known as VNU N.V., a Dutch company. We incurred additional merger costs of $6,016 in 2006 for investment banker fees and expenses related to a payment received from Nielsen in accordance with the terms of the merger termination agreement (see Other Income (Expense), net below). See Note 16 to our Consolidated Financial Statements for a description of the events surrounding the terminated merger with Nielsen.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Results of Operations



Reclassifications. Certain prior-year amounts have been reclassified to conform to the 2008 presentation.



References to constant dollar results and results excluding the effect of foreign currency translations. We report results in U.S. dollars, but we do business on a global basis. Exchange rate fluctuations affect the rate at which we translate foreign revenues and expenses into U.S. dollars and may have significant effects on our results. In order to illustrate these effects, the discussion of our business in this report sometimes describes the magnitude of changes in constant dollar terms or results excluding the effect of foreign currency translations. We believe this information facilitates a comparative view of our business. In the first six months of 2008, the U.S. dollar was generally weaker against other currencies as compared to the first six months of 2007. As a result, growth at constant dollar exchange rates was lower than growth at actual currency exchange rates. See “How Exchange Rates Affect Our Results” below and the discussion of “Market Risk” in the Management Discussion and Analysis section of our annual report on Form 10-K for the year ended December 31, 2007 for a more complete discussion regarding the impact of foreign currency translation on our business.

Operating Income



Our operating income for the second quarter of 2008 grew 11.2% to $131,377 from $118,137 in the second quarter of 2007. This was due to the increase in our operating revenue, offset by increases in our operating costs and selling and administrative expenses driven by increased cost of data and investments in consulting and services capabilities. Our operating income increased 1.3% in constant dollar terms. Our operating income for the first six months of 2008 grew 8.1% to $247,759 from $229,200 in the first six months of 2007. This was due to the increase in our operating revenue, offset by increases in our operating costs and selling and administrative expenses driven by increased cost of data and investments in consulting and services capabilities. Our operating income decreased 0.8% in constant dollar terms.



Operating Revenue



Our operating revenue for the second quarter of 2008 grew 11.8% to $600,709 from $537,472 in the second quarter of 2007. On a constant dollar basis, operating revenue growth was 4.2%. Operating revenue for the first six months of 2008 grew 12.1% to $1,174,889 from $1,047,821 in the first six months of 2007. On a constant dollar basis our operating revenue growth was 4.9%. On a constant dollar basis, acquisitions completed within the prior twelve months contributed approximately 2.0 and 1.9 percentage points to our operating revenue growth for the second quarter and first six months of 2008, respectively. The increase in our operating revenue resulted from growth in revenue due to higher purchases of products and consulting offerings from existing customers in all three of our business lines, together with the effect of approximately $41,000 and $76,000 of currency translation for the second quarter and first six months of 2008, respectively, as compared to the second quarter and first six months of 2007. On a constant dollar basis, our Sales Force Effectiveness and Launch, Brand Management and Other business lines grew.

• Sales Force Effectiveness: The Americas was the primary contributor to the revenue growth for the second quarter of 2008. The Americas contributed more than one-half and EMEA contributed more than one-third to the revenue growth for the first six months of 2008.



• Portfolio Optimization: EMEA was the primary contributor to the constant dollar revenue decline for the second quarter of 2008 almost completely offset by revenue growth in Asia Pacific. EMEA was the primary contributor to the constant dollar revenue decline for the first six months of 2008 almost completely offset by revenue growth in Asia Pacific and the Americas.



• Launch, Brand Management and Other: EMEA contributed more than one-half and the Americas contributed more than one-third to the revenue growth for the second quarter of 2008. The Americas and EMEA contributed equally to the growth in the first six months of 2008.



Consulting and services (“C&S”) revenue, as included in the business lines above, was $147,269 in the second quarter of 2008, up 26.0% from $116,921 in the second quarter of 2007 (up 17.9% on a constant dollar basis). Approximately one-third of the C&S revenue growth for the second quarter of 2008 was attributable to acquisitions completed during the prior twelve months. C&S revenue, as included in the business lines above, was $265,262 in the first six months of 2008, up 21.1% from $219,109 in the first six months of 2007 (up 13.5% on a constant dollar basis). More than one-third of the C&S revenue growth for the first six months of 2008 was attributable to acquisitions completed during the prior twelve months.



Operating Costs of Information and Analytics



Operating costs of information and analytics (“I&A”) include costs of data, data processing and collection and costs attributable to personnel involved in production, data management and delivery of the Company’s I&A offerings.



Our operating costs of I&A grew 8.1% to $192,166 in the second quarter of 2008 from $177,828 in the second quarter of 2007. Our operating costs of I&A grew 10.6% to $385,452 in the first six months of 2008 from $348,478 in the first six months of 2007.



• Foreign Currency Translation : The effect of foreign currency translation increased our operating costs of I&A by approximately $13,000 and $26,000 for the second quarter and first six months of 2008, respectively, as compared to the second quarter and first six months of 2007.



Excluding the effect of foreign currency translation, our operating costs of I&A grew 0.5% and 3.3% in the second quarter and first six months of 2008, respectively, as compared to the second quarter and first six months of 2007.



• Data : Data costs increased by approximately $7,000 and $16,000 in the second quarter and first six months of 2008, respectively, as compared to the second quarter and first six months of 2007.



• Production, Client Services and Other : Production, client services and other costs decreased by approximately $6,000 and $5,000 for the second quarter and first six months of 2008, respectively, as compared to the second quarter and first six months of 2007.



Direct and Incremental Costs of Consulting and Services



Direct and incremental costs of C&S include the costs of consulting staff directly involved with delivering revenue-generating engagements, related accommodations and the costs of primary market research data purchased specifically for certain individual C&S engagements. Direct and incremental costs of C&S do not include an allocation of direct costs of data that are included within I&A. Our direct and incremental costs of C&S grew 31.9% to $73,660 in the second quarter of 2008 from $55,848 in the second quarter of 2007. Our direct and incremental costs of C&S grew 24.0% to $141,722 in the first six months of 2008 from $114,324 in the first six months of 2007.



• Foreign Currency Translation : The effect of foreign currency translation increased our direct and incremental costs of C&S by approximately $5,000 and $9,000 for the second quarter and first six months of 2008, respectively, as compared to the second quarter and first six months of 2007.



Excluding the effect of foreign currency translation, our direct and incremental costs of C&S grew 23.0% and 16.0% in the second quarter and first six months of 2008, respectively, as compared to the second quarter and first six months of 2007.



• C&S costs increased by approximately $13,000 and $18,000 in the second quarter and first six months of 2008, respectively, as compared to the second quarter and first six months of 2007, due to increased labor, accommodations and primary market research data expense, all directly related to C&S revenue growth.

External-Use Software Amortization



Our external-use software amortization charges represent the amortization associated with

software we capitalized under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.” Our external-use software amortization charges grew 5.4% to $13,043 in the second quarter of 2008 from $12,376 in the second quarter of 2007. Our external-use software amortization charges grew 9.0% to $25,757 in the first six months of 2008 from $23,621 in the first six months of 2007. These were due to increased software amortization associated with new products.



Selling and Administrative Expenses



Our selling and administrative expenses consist primarily of the expenses attributable to sales, marketing, and administration, including human resources, legal, management and finance. Our selling and administrative expenses grew 8.9% in the second quarter of 2008, to $168,097 from $154,361 in the second quarter of 2007. Our selling and administrative expenses grew 12.5% to $330,789 in the first six months of 2008 as compared to $294,125 in the first six months of 2007.



• Foreign Currency Translation : The effect of foreign currency translation increased our selling and administrative expenses by approximately $9,000 and $18,000 for the second quarter and first six months of 2008, respectively, as compared to the second quarter and first six months of 2007.



Excluding the effect of foreign currency translation, our selling and administrative expenses grew 2.9% and 6.4% in the second quarter and first six months of 2008, respectively, as compared to the second quarter and first six months of 2007 to support revenue growth.



• Sales and Marketing : Sales and marketing expense decreased by approximately $3,000 in the second quarter of 2008 as compared to the second quarter of 2007. Sales and marketing expense remained relatively constant for the first six months of 2008 as compared to the first six months of 2007.



• Consulting : Consulting and services expenses decreased by approximately $7,000 in the second quarter of 2008 as compared to the second quarter of 2007 and increased by approximately $1,000 in the first six months of 2008 as compared to the first six months of 2007.



• Administrative and Other : Other expenses increased by approximately $14,000 and $18,000 in the second quarter and first six months of 2008, respectively, as compared to the second quarter and first six months of 2007.



Depreciation and Other Amortization



Our depreciation and other amortization charges increased 18.2% to $22,366 in the second quarter of 2008 from $18,922 in the second quarter of 2007, and 14.0% to $43,410 in the first six months of 2008 from $38,073 in the first six months of 2007 due to increased depreciation related to new facilities and technology to upgrade our systems and increased amortization related to internal-use software additions.

CONF CALL

Darcie Peck - Vice President of Investor Relations

Thank you, operator. Good morning everyone and welcome to the IMS Second Quarter 2008 Earnings Conference Call.

With me today are Dave Carlucci, our Chairman and Chief Executive Officer; Leslye Katz, our Chief Financial Officer and Gilles Pajot, our Chief Operating Officer. Dave and Leslye will discuss highlights from our second quarter 2008 results and then we will open it up for your questions.

As in the past, we've posted slides on our website and I would encourage you to view these during our prepared remarks this morning.

Certain statements we make today are forward-looking within the meaning of the U.S. federal securities laws. These statements include certain projections regarding the trends in our business, future events and future financial performance. We caution you that these statements are just predictions and the actual event or results may differ. They can be affected by inaccurate assumptions or by known or unknown risks or uncertainties. Consequently, no forward-looking statement can be guaranteed.

I call your attention to our second quarter 2008 earnings release, which we issued this morning and our full year 2007 report on Form 10-K which describe the factors that could cause actual results to differ materially from those contained in forward-looking statements. Forward-looking statements represent our views only as of the date they are made and the company undertakes no obligation to correct or update them, whether as a result of new information, future events or otherwise

Certain of the financial measures we'll talk about today are on an adjusted non-GAAP basis. These may include, for example, operating income, net income, EPS and free cash flow. Detailed reconciliations to results on a U.S. GAAP reported basis is in our press release, and I encourage investors to review the notes in our press release further describing adjusted non-GAAP measures.

Now, I'd like to turn the call over to Dave Carlucci. Dave?

David R. Carlucci - Chairman and Chief Executive Officer

Thank you, Darcie. Good morning everyone and thanks for joining us.

As you've seen in our press release, we finished the first half of 2008 with a very good second quarter performance, putting us in a solid position to achieve our objectives for the full year. In the quarter, revenue was $601 million, up 12% reported. As you know, a significant share of our business comes from outside the U.S. and our reported growth continues to reflect the benefit of a weaker dollar.

Operating income rose 11% as reported. Adjusted earnings per share was $0.40, up a penny over last year's second quarter.

On our last call, we told you that we expected improved performance in our Consulting and Services business, and we delivered on that with 26% reported growth. And I am also very pleased with the progress we've made on our restructuring actions along with the overall management of our cost and expense.

Now let's get right to our regional results. In the Americas, we posted 7% reported revenue growth in the quarter and an 8% increase through the first half of the year. We sustained strong performance in the U.S., which delivered high single-digit growth. In Consulting and Services, particularly in our managed markets, pricing and market access and commercial effectiveness practices, growth also accelerated and our weekly Xponent and patient-centered offerings were key contributors in the region.

Looking at the second half, we expect additional wins with these information offerings, and we will build on our strong double-digit momentum in Consulting and Services.

The EMEA region grew 16% reported in the quarter and 15% through the first half. While growth in the major markets moderated somewhat in the second quarter, we did see a turnaround in Germany in the quarter and the UK delivered good growth year-to-date, providing a solid foundation for pick up in the second half. The mid-sized markets continue to perform well and we expect further strengthening there as we roll out new sales force effectiveness offerings.

I am pleased with the improving profit picture in Europe where our accelerated restructuring actions and tighter cost controls are starting to pay off with better sequential operating income performance. All these steps will lead to continued improvement through the end of the year.

In Asia Pacific, revenue rose 15% reported in the quarter and 16% year-to-date. This reflected both a pick up in C&S demand in the second quarter, offset by more moderate growth in Japan.

Our growth remained strong in China, where clients increasingly are looking to us for advice on their sales deployment and expansion strategies. We anticipate strong performance in Asia Pacific through the second half of the year with continued double-digit growth.

From a business line perspective, sales force effectiveness grew 12% as reported year-to-date. While growth in our SFE [Sales Force Effectiveness] business slowed somewhat in the second quarter, following a very good start to the year, our performance remains on track through the first half. Our SFE Consulting and Services offerings did well as we benefited from clients' implementation of their commercial model changes and an increased focus on emerging markets.

As we look to the second half, we expect continued strength in these areas. And overall, we'll have revenue growth in SFE through the end of the year similar to what we saw in the first half.

Our Portfolio Optimization business was up 6% reported year-to-date. As you're aware, we plan for more moderate growth in PO this year. Going into the second half, we have good momentum with our patient-centered information capabilities, portfolio strategy consulting engagements and offerings for our generics clients.

Launch, Brand and Other grew 19% reported through the first half with continued growth in our brand management, consumer health and managed markets offerings. IMS capabilities to help clients better understand payor and consumer trends are driving new business and that will continue into the second half.

Our revenue in the health economics and outcomes research space accelerated and will be a key contributor to growth going forward as clients increasingly need to demonstrate the value of their medicines.

And in Consulting and Services, growth through the first half of the year was 21% as reported. Our new practice area alignment is starting to pay dividends with cross-practice wins at a large number of clients both in EMEA and the U.S. Clients are recognizing the breadth of our commercial effectiveness offerings and new services capabilities. And we continue to execute well in helping them understand payor dynamics and the implication to their pricing strategies.

Overall, we are pleased with our C&S performance in the first half and we are going to continue to drive improving profitability and sustain double-digit growth through 2008.

So we delivered good top line growth and very good operating performance through the first half of the year. During that period, our revenue with our top 20 global clients grew 11% reported as did our top 8 countries, while our 7 emerging markets grew revenue at a 16% pace through the first half, led by China, Turkey and Brazil.

Also, we are ahead of plan on our implementation of our restructuring actions through 2008 and are on track to achieve annual savings of $55 million to $60 million in 2009. We had a much better DSO and cash performance in the second quarter and we are on track to deliver $300 million to $325 million of free cash flow this year.

Based on our performance for the first half, we are comfortable with our full year guidance. In light of a market environment that remains challenging for clients and a major restructuring of our company, I think our team is executing very well.

Now I will turn the call over to Leslye who will take you through the details of our quarter. Leslye?

Leslye G. Katz - Senior Vice President and Chief Financial Officer

Thank you, Dave, and good morning everyone. Dave took you through the dynamics behind our performance in the quarter and through the first half. I will provide you with some views of constant dollar revenue growth and describe the factors that contributed to our operating income growth and cash flow performance in the quarter. I will also provide an update on our restructuring program and close with guidance.

In the second quarter, revenue was $601 million, up 12%, including the benefit of a generally weaker dollar compared to Q2 2007. Revenue growth on a constant dollar basis was 4% in the quarter and 5% year-to-date.

From a regional perspective, revenue in the Americas grew 6% constant dollar in the quarter and year-to-date. In EMEA, revenue growth was 3% constant dollar in the quarter and first half. And Asia Pacific revenue was up 4% constant dollar in the quarter and 6% year-to-date.

Over the last five quarters, our Information & Analytics growth continued to be choppy. In the second quarter, I&A revenue grew 8% on a reported basis and was flat constant dollar. Year-to-date, I&A revenue increased 3% constant dollar.

Consulting and Services grew quite strongly in the quarter, 26% reported, 18% constant dollar. Year-to-date, C&S revenue grew 14% constant dollar. Our growth in C&S improved sequentially in the second quarter with double-digit constant dollar growth in all regions. In particular, C&S growth accelerated nicely in the Asia Pacific region outside of Japan. Across our service lines, revenue growth also increased this quarter with exceptional performance in information management and managed market services.

On a global basis, our pricing and market access and portfolio and product strategy practices were key drivers of the improved consulting performance. We expect double-digit constant dollar Consulting and Services revenue growth to continue for the remainder of this year.

From a business line perspective, year-to-date constant dollar growth for Sales Force Effectiveness was 5%, Portfolio Optimization was flat and Launch, Brand and Other was up 12%. Cost and expense in the quarter totaled $469 million, up 12% reported and 5% constant dollar. I&A operating cost grew in with I&A revenue growth, allowing us to maintain gross margin essentially flat for both the second quarter and year-to-date compared to last year. C&S operating cost grew faster than revenue in the quarter and year-to-date. Utilization improved from the mid-60s in Q1 to high-60s in Q2, which is more in line with our targeted levels.

SG&A growth slowed significantly in the quarter and was better than balanced with revenue growth. This is the result of an intense focus on the pace of hiring, discretionary expense control, improved consulting utilization and benefits from our restructuring program. Clearly, this year we are prepared for more variability in our revenue growth.

By tightly managing our restructuring, hiring and discretionary expense, we delivered operating income growth this quarter. The restructuring actions are well underway and on track to achieve the cost expense savings that we laid out for you in our guidance call in January. When the restructuring plan is completed, we expect 2009 full year savings of $55 million to $60 million.

As you may recall, there are three primary elements to the restructuring plan: One, strengthening our client facing operations worldwide; two, increasing the company's operating efficiencies and three, streamlining our cost structure for the better than balanced growth that we've set as our goal. We continue to be ahead of plan in streamlining our support functions across the region.

In the customer delivery and development function, we have completed actions as planned for the first half of the year. Significant reductions in this area are scheduled for the second half and we will see the benefit of those primarily in the fourth quarter. A large element of this plan will include the migration of production and data collection work to lower cost locations in Europe and Latin America and to offshore service providers.

Operating income in the second quarter was $131 million, up 11% reported and 1% constant dollar. Operating margin was 22% in the quarter, an improvement of 160 basis points from Q1 and essentially flat with the second quarter of last year.

Year-to-date, operating income was up 8% reported and down 1% on a constant dollar basis. This is consistent with how we expected operating income to flow in the first half versus second half of the year. Within the second half, we expect our growth to be skewed heavily to the fourth quarter, even more than in prior years, reflecting the fact that the benefits from restructuring are maximized in the fourth quarter.

Total interest expense net was $9 million, an increase of just over $1 million compared with second quarter 2007. This results from higher levels of debt, primarily due to our share repurchase in the first quarter. Other expense was $8 million, a year-to-year increase of $10 million, primarily driven by foreign exchange hedge losses. Second quarter 2008 included a foreign exchange hedge loss of $6 million compared to a two million gain last year.

On a GAAP basis, net income was $78 million, up 6%. After adjusting for the phasing of foreign exchanging hedge losses, Q2 net income was $73 million, down 7%.

GAAP EPS was $0.42, up $0.06 over Q2 '07. Adjusted EPS in the quarter was $0.40, up 3% over the second quarter of last year. The $0.02 difference between GAAP and adjusted EPS related to the $4 million after-tax impact of foreign exchange hedge loss phasing.

Preliminary free cash flow in the quarter was $86 million, up $131 million sequentially. Year-to-date, preliminary free cash flow was $41 million including the cash outlay of $28 million for severance under the restructuring plan.

DSO was 67 days in the second quarter, 10 days better than the first quarter and 1 day behind second quarter of last year. All of our regions made excellent progress from the first quarter. As you may recall, DSO in the U.S. was affected by some billing delays in the first quarter, the results of the implementation of our new global SAP system. As expected, U.S. DSO improved substantially in Q2. We also experienced minimal impact on DSO as we rolled out the new SAP system in EMEA and Latin America in the second quarter.

In terms of capital allocation, we did not repurchase any shares in the second quarter. Year-to-date, we repurchased 10 million shares at an average share price of $22.93 for a total cost of $229 million. 10 million shares remain authorized and available for repurchase under the December 2007 Board authorization.

During the second quarter, we spent $19 million on two acquisitions, bringing the total spent on acquisitions this year to $24 million. We also spent $35 million on deferred software and capital expenditures in the second quarter, essentially flat from the second quarter of last year. Year-to-date spending on software and CapEx was $59 million, down about $10 million from the first half of '07.

Cash and equivalents totaled $221 million at quarter end, an increase of $5 million compared with March 31, 2008. Debt as of June 30th totaled just under $1.5 billion, a decrease of $94 million compared with March 31st, primarily due to strong second quarter cash flows and the foreign exchange impact of a stronger dollar on our yen-denominated borrowings.

Turning to our guidance for the year. From a top line perspective, given our revenue growth performance through the first half and the limited number of acquisitions completed so far this year, we will likely end the year closer to the low end of our full year revenue guidance of 6% to 9% constant dollar growth.

Recapping the other elements of our full year guidance, we expect constant dollar operating income growth of 6% to 11%, GAAP EPS of $1.70 to $1.76 and free cash flow of $300 million to $325 million.

Now let me turn the call back to Dave.

David R. Carlucci - Chairman and Chief Executive Officer

Thanks Leslye. To summarize, we had a very solid performance for the first two quarters of this year and our game plan for 2008 hasn't changed.

The marketplace dynamics are playing out as we expected. Clients are more focused than ever on managing their costs and expense. And to do that, they must deploy their resources more effectively. Our value proposition is focused on just that, by improving their commercial productivity.

Bottom line: we know the areas of opportunity in the marketplace and the adjustments we made to our offerings and to our client facing teams enable us to capture those opportunities. That puts us in a good position for the remainder of the year.

So thanks for your time this morning, and Gilles, Leslye and I would be happy to take your questions.

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