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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2011.

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from              to
            .

Commission File Number: 001-33739





STREAM GLOBAL SERVICES, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 26-0420454                          
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|20 William Street, Suite 310 Wellesley, Massachusetts          |  | 02481                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          

(781)
304-1800

(Registrants Telephone Number, Including Area Code)





Securities registered pursuant to Section 12(b) of the Act:



|                               |  |                                          
|------------------------------ |  | -----------------------------------------
|Title of Each Class            |  | Name of Each Exchange on Which Registered
|Units                          |  | NYSE Amex                                
|Common Stock, $0.001 Par Value |  | NYSE Amex                                
|Warrants                       |  | NYSE Amex                                

Securities
registered pursuant to Section 12(g) of the Act:

None



Title of Class





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large Accelerated Filer |  |  ̈                                                |  | Accelerated Filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated Filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

There were 80,365,876 shares of the Registrants common stock, $0.001 par value per share, issued and outstanding as of May 3,
2011 (including shares of common stock that are part of the Registrants outstanding, publicly traded units).









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TABLE OF CONTENTS



|                              |  |                                                                                                     |    |      |    | 
|----------------------------- |  | --------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                              |  |                                                                                                     |    | Page |   
|PART I. FINANCIAL INFORMATION |  |                                                                                                     | 1  |     
|                              |  |                                                                                                    
|Item 1.                       |  | Consolidated Financial Statements                                                                   |    |      | 1  | 
|                              |  |                                                                                                    
|                              |  | Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010                              |    |      | 1  | 
|                              |  |                                                                                                    
|                              |  | Consolidated Statements of Operations for the three months ended March 31, 2011 and March 31, 2010  |    |      | 2  | 
|                              |  |                                                                                                    
|                              |  | Consolidated Condensed Statements of Stockholders Equity for the three months ended March 31, 2011 |    |      | 3  | 
|                              |  |                                                                                                    
|                              |  | Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and March 31, 2010  |    |      | 4  | 
|                              |  |                                                                                                    
|                              |  | Notes to Consolidated Condensed Financial Statements                                                |    |      | 5  | 
|                              |  |                                                                                                    
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations               |    |      | 17 | 
|                              |  |                                                                                                    
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                          |    |      | 21 | 
|                              |  |                                                                                                    
|Item 4.                       |  | Controls and Procedures                                                                             |    |      | 23 | 
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                     | 24 |     
|                              |  |                                                                                                    
|Item 1.                       |  | Legal Proceedings                                                                                   |    |      | 24 | 
|                              |  |                                                                                                    
|Item 1A.                      |  | Risk Factors                                                                                        |    |      | 24 | 
|                              |  |                                                                                                    
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                         |    |      | 24 | 
|                              |  |                                                                                                    
|Item 5.                       |  | Other Information                                                                                   |    |      | 24 | 
|                              |  |                                                                                                    
|Item 6.                       |  | Exhibits                                                                                            |    |      | 24 | 
|                              | 
|SIGNATURES                    |  |                                                                                                     | 25 |     

Stream is a registered trademark of
Stream Global Services, Inc.



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PART IFINANCIAL INFORMATION



|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS
|------- | ---------------------------------

STREAM GLOBAL SERVICES, INC.

Consolidated
Balance Sheets

(In thousands, except per share amounts)



|                                                                                                                                                                                                           |  |                          |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                                           |  | March 31,2011(unaudited) |         |   | December 31,2010 |  
|Assets                                                                                                                                                                                                     |  |                          |         |   |                  |   |         |  
|Current assets:                                                                                                                                                                                            |  |                          |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                                                  |  | $                        | 24,814  |   |                  | $ | 18,489  |  
|Accounts receivable, net of allowance for bad debts of $586 and $714 at March 31, 2011 and December 31, 2010,
respectively                                                                                 |  |                          | 168,578 |   |                  |   | 180,211 |  
|Income taxes receivable                                                                                                                                                                                    |  |                          | 1,468   |   |                  |   | 1,154   |  
|Deferred income taxes                                                                                                                                                                                      |  |                          | 15,896  |   |                  |   | 15,665  |  
|Prepaid expenses and other current assets                                                                                                                                                                  |  |                          | 23,770  |   |                  |   | 20,371  |  
|                                                                                                                                                                                                           |  |                          |         |   |                  |   |         |  
|Total current assets                                                                                                                                                                                       |  |                          | 234,526 |   |                  |   | 235,890 |  
|Equipment and fixtures, net                                                                                                                                                                                |  |                          | 77,670  |   |                  |   | 80,859  |  
|Deferred income taxes                                                                                                                                                                                      |  |                          | 4,036   |   |                  |   | 3,975   |  
|Goodwill                                                                                                                                                                                                   |  |                          | 226,749 |   |                  |   | 226,749 |  
|Intangible assets, net                                                                                                                                                                                     |  |                          | 79,281  |   |                  |   | 83,674  |  
|Other assets                                                                                                                                                                                               |  |                          | 16,258  |   |                  |   | 16,838  |  
|                                                                                                                                                                                                           |  |                          |         |   |                  |   |         |  
|Total assets                                                                                                                                                                                               |  | $                        | 638,520 |   |                  | $ | 647,985 |  
|                                                                                                                                                                                                           |  |                          |         |   |                  |   |         |  
|Liabilities and Stockholders Equity                                                                                                                                                                       |  |                          |         |   |                  |   |         |  
|Current liabilities:                                                                                                                                                                                       |  |                          |         |   |                  |   |         |  
|Accounts payable                                                                                                                                                                                           |  | $                        | 13,473  |   |                  | $ | 10,758  |  
|Accrued employee compensation and benefits                                                                                                                                                                 |  |                          | 58,876  |   |                  |   | 59,797  |  
|Other accrued expenses                                                                                                                                                                                     |  |                          | 32,108  |   |                  |   | 29,989  |  
|Income taxes payable                                                                                                                                                                                       |  |                          | 3,318   |   |                  |   | 1,796   |  
|Current portion of long-term debt                                                                                                                                                                          |  |                          | 98      |   |                  |   | 96      |  
|Current portion of capital lease obligations                                                                                                                                                               |  |                          | 9,049   |   |                  |   | 9,100   |  
|Other liabilities                                                                                                                                                                                          |  |                          | 6,001   |   |                  |   | 7,072   |  
|                                                                                                                                                                                                           |  |                          |         |   |                  |   |         |  
|Total current liabilities                                                                                                                                                                                  |  |                          | 122,923 |   |                  |   | 118,608 |  
|Long-term debt, net of current portion                                                                                                                                                                     |  |                          | 203,052 |   |                  |   | 217,199 |  
|Capital lease obligations, net of current portion                                                                                                                                                          |  |                          | 9,209   |   |                  |   | 10,491  |  
|Deferred income taxes                                                                                                                                                                                      |  |                          | 21,837  |   |                  |   | 21,838  |  
|Other long-term liabilities                                                                                                                                                                                |  |                          | 19,130  |   |                  |   | 20,131  |  
|                                                                                                                                                                                                           |  |                          |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                                                          |  |                          | 376,151 |   |                  |   | 388,267 |  
|Contingencies (Note 13)                                                                                                                                                                                    |  |                          |         |   |                  |   |         |  
|Stockholders equity:                                                                                                                                                                                      |  |                          |         |   |                  |   |         |  
|Preferred stock, par value $0.001 per share, shares authorized1,000 shares authorized; issued and outstanding shares
0 shares issued and outstanding                                                     |  |                          |        |   |                  |   |        |  
|Voting common stock, par value $0.001 per share, shares authorized200,000 shares authorized; issued and outstanding
shares80,111 and 80,101 shares at March 31, 2011 and December 31, 2010, respectively |  |                          | 80      |   |                  |   | 80      |  
|Non-voting common stock, par value $0.001 per share, shares authorized11,000 shares authorized; issued and outstanding
shares0 shares issued and outstanding                                             |  |                          |        |   |                  |   |        |  
|Additional paid-in-capital                                                                                                                                                                                 |  |                          | 344,923 |   |                  |   | 344,192 |  
|Accumulated deficit                                                                                                                                                                                        |  |                          | (85,542 | ) |                  |   | (83,447 | )
|Accumulated other comprehensive income (loss)                                                                                                                                                              |  |                          | 2,908   |   |                  |   | (1,107  | )
|                                                                                                                                                                                                           |  |                          |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                                                                                 |  |                          | 262,369 |   |                  |   | 259,718 |  
|                                                                                                                                                                                                           |  |                          |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                                                                                 |  | $                        | 638,520 |   |                  | $ | 647,985 |  
|                                                                                                                                                                                                           |  |                          |         |   |                  |   |         |  

See accompanying notes to consolidated condensed financial statements.



1



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STREAM GLOBAL SERVICES, INC.

Consolidated Condensed Statements of Operations

(Unaudited)

(In thousands, except per share amounts)



|                                                |  |                             |         |   |      |   |         |  
|----------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                |  | Three Months
EndedMarch 31, |        
|                                                |  | 2011                        |         |   | 2010 |  
|Revenue                                         |  | $                           | 212,691 |   |      | $ | 196,575 |  
|Direct cost of revenue                          |  |                             | 121,953 |   |      |   | 112,584 |  
|                                                |  |                             |         |   |      |   |         |  
|Gross profit                                    |  |                             | 90,738  |   |      |   | 83,991  |  
|Operating expenses:                             |  |                             |         |   |      |   |         |  
|Selling, general and administrative expenses    |  |                             | 68,802  |   |      |   | 68,565  |  
|Depreciation and amortization expense           |  |                             | 14,585  |   |      |   | 16,429  |  
|Severance, restructuring and other charges, net |  |                             | (126    | ) |      |   | 1,609   |  
|                                                |  |                             |         |   |      |   |         |  
|Total operating expenses                        |  |                             | 83,261  |   |      |   | 86,603  |  
|                                                |  |                             |         |   |      |   |         |  
|Income (loss) from operations                   |  |                             | 7,477   |   |      |   | (2,612  | )
|Other expenses, net:                            |  |                             |         |   |      |   |         |  
|Interest expense, net                           |  |                             | 7,262   |   |      |   | 7,602   |  
|Foreign currency loss (gain)                    |  |                             | 1,245   |   |      |   | (1,549  | )
|                                                |  |                             |         |   |      |   |         |  
|Total other expenses, net                       |  |                             | 8,507   |   |      |   | 6,053   |  
|                                                |  |                             |         |   |      |   |         |  
|Loss before provision for income taxes          |  |                             | (1,030  | ) |      |   | (8,665  | )
|Provision for income taxes                      |  |                             | 1,065   |   |      |   | 1,810   |  
|                                                |  |                             |         |   |      |   |         |  
|Net loss                                        |  | $                           | (2,095  | ) |      | $ | (10,475 | )
|Net loss per share:                             |  |                             |         |   |      |   |         |  
|Basic and diluted                               |  | $                           | (0.03   | ) |      | $ | (0.13   | )
|Shares used in computing per share amounts:     |  |                             |         |   |      |   |         |  
|Basic and diluted                               |  |                             | 80,126  |   |      |   | 80,009  |  

See accompanying notes
to consolidated condensed financial statements.



2



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STREAM GLOBAL SERVICES, INC.

Consolidated Condensed Statements of Stockholders Equity

For the three months ended March 31, 2011

(Unaudited)

(In thousands)



|                                                       |  |              |        |  |                          |   |    |                           |  |   |                                            |   |  |       |         |   |  |   |        |   |  |   |         |  
|------------------------------------------------------ |  | ------------ | ------ |  | ------------------------ | - | -- | ------------------------- |  | - | ------------------------------------------ | - |  | ----- | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                                       |  | Common Stock |        |  | AdditionalPaid inCapital |   |    | RetainedEarnings(Deficit) |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | Total |        
|                                                       |  | Shares       |        |  | ParValue                 |   |    |                           |  |  
|Balances at December 31, 2010                          |  |              | 80,101 |  |                          | $ | 80 |                           |  | $ | 344,192                                    |   |  | $     | (83,447 | ) |  | $ | (1,107 | ) |  | $ | 259,718 |  
|Net loss                                               |  |              |       |  |                          |   |   |                           |  |   |                                           |   |  |       | (2,095  | ) |  |   |       |   |  |   | (2,095  | )
|Currency translation adjustment                        |  |              |       |  |                          |   |   |                           |  |   |                                           |   |  |       |        |   |  |   | 4,409  |   |  |   | 4,409   |  
|Unrealized loss on derivatives                         |  |              |       |  |                          |   |   |                           |  |   |                                           |   |  |       |        |   |  |   | (394   | ) |  |   | (394    | )
|                                                       |  |              |        |  |                          |   |    |                           |  |   |                                            |   |  |       |         |   |  |   |        |   |  |   |         |  
|Comprehensive income                                   |  |              |       |  |                          |   |   |                           |  |   |                                           |   |  |       |        |   |  |   |       |   |  |   | 1,920   |  
|Stock option exercises and vesting of restricted stock |  |              | 10     |  |                          |   |   |                           |  |   |                                           |   |  |       |        |   |  |   |       |   |  |   |        |  
|Stock-based compensation expense                       |  |              |       |  |                          |   |   |                           |  |   | 745                                        |   |  |       |        |   |  |   |       |   |  |   | 745     |  
|Taxes withheld on restricted stock                     |  |              |       |  |                          |   |   |                           |  |   | (14                                        | ) |  |       |        |   |  |   |       |   |  |   | (14     | )
|                                                       |  |              |        |  |                          |   |    |                           |  |   |                                            |   |  |       |         |   |  |   |        |   |  |   |         |  
|Balances at March 31, 2011                             |  |              | 80,111 |  |                          | $ | 80 |                           |  | $ | 344,923                                    |   |  | $     | (85,542 | ) |  | $ | 2,908  |   |  | $ | 262,369 |  
|                                                       |  |              |        |  |                          |   |    |                           |  |   |                                            |   |  |       |         |   |  |   |        |   |  |   |         |  

See accompanying notes to consolidated condensed financial statements.



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STREAM GLOBAL SERVICES, INC.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)



|                                                                                       |  |                             |         |   |      |   |         |  
|-------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                       |  | Three Months
EndedMarch 31, |        
|                                                                                       |  | 2011                        |         |   | 2010 |  
|Operating Activities:                                                                  |  |                             |         |   |      |   |         |  
|Net loss                                                                               |  | $                           | (2,095  | ) |      | $ | (10,475 | )
|Adjustments to reconcile net loss to net cash provided by operating activities:        |  |                             |         |   |      |   |         |  
|Depreciation and amortization                                                          |  |                             | 14,585  |   |      |   | 16,429  |  
|Amortization of debt issuance costs                                                    |  |                             | 577     |   |      |   | 843     |  
|Deferred taxes                                                                         |  |                             | (148    | ) |      |   | 386     |  
|Loss on disposal of assets                                                             |  |                             |        |   |      |   | (13     | )
|Amortization of bond discount                                                          |  |                             | 383     |   |      |   |        |  
|Impairment of fixed assets                                                             |  |                             | 37      |   |      |   |        |  
|Noncash stock compensation                                                             |  |                             | 745     |   |      |   | 1,329   |  
|Changes in operating assets and liabilities:                                           |  |                             |         |   |      |   |         |  
|Accounts receivable                                                                    |  |                             | 15,150  |   |      |   | 12,187  |  
|Income taxes receivable                                                                |  |                             | (336    | ) |      |   | (172    | )
|Prepaid expenses and other current assets                                              |  |                             | (3,583  | ) |      |   | (1,762  | )
|Other assets                                                                           |  |                             | 123     |   |      |   | 450     |  
|Accounts payable                                                                       |  |                             | 2,554   |   |      |   | 243     |  
|Accrued expenses and other liabilities                                                 |  |                             | (1,179  | ) |      |   | (2,128  | )
|                                                                                       |  |                             |         |   |      |   |         |  
|Net cash provided by operating activities                                              |  |                             | 26,813  |   |      |   | 17,317  |  
|Investing Activities:                                                                  |  |                             |         |   |      |   |         |  
|Additions to equipment and fixtures                                                    |  |                             | (5,101  | ) |      |   | (2,776  | )
|                                                                                       |  |                             |         |   |      |   |         |  
|Net cash used in investing activities                                                  |  |                             | (5,101  | ) |      |   | (2,776  | )
|Financing activities:                                                                  |  |                             |         |   |      |   |         |  
|Net repayments on line of credit                                                       |  |                             | (14,506 | ) |      |   | (8,548  | )
|Payments on long-term debt                                                             |  |                             | (24     | ) |      |   | (21     | )
|Payment of capital lease obligations                                                   |  |                             | (2,446  | ) |      |   | (1,697  | )
|Proceeds from capital leases                                                           |  |                             |        |   |      |   | 1,669   |  
|Proceeds from exercise of warrants                                                     |  |                             |        |   |      |   | 1,001   |  
|Proceeds from issuance of common stock related to pre-emptive rights and stock options |  |                             |        |   |      |   | 112     |  
|Tax payments on withholding of restricted stock                                        |  |                             | (14     | ) |      |   |        |  
|                                                                                       |  |                             |         |   |      |   |         |  
|Net cash used in financing activities                                                  |  |                             | (16,990 | ) |      |   | (7,484  | )
|Effect of exchange rates on cash and cash equivalents                                  |  |                             | 1,603   |   |      |   | (386    | )
|Net increase in cash and cash equivalents                                              |  |                             | 6,325   |   |      |   | 6,671   |  
|Cash and cash equivalents, beginning of period                                         |  |                             | 18,489  |   |      |   | 14,928  |  
|                                                                                       |  |                             |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                               |  | $                           | 24,814  |   |      | $ | 21,599  |  
|Supplemental cash flow information:                                                    |  |                             |         |   |      |   |         |  
|Cash paid for interest                                                                 |  | $                           | 744     |   |      | $ | 880     |  
|Cash paid for income taxes                                                             |  |                             | 1,334   |   |      |   | 3,520   |  
|Noncash financing activities:                                                          |  |                             |         |   |      |   |         |  
|Loss (gain) on foreign exchange forward contracts                                      |  |                             | 394     |   |      |   | (1,266  | )
|Capital lease financing                                                                |  |                             | 1,052   |   |      |   | 1,282   |  

See accompanying notes
to consolidated condensed financial statements.



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STREAM GLOBAL SERVICES, INC.

Notes to Consolidated Condensed Financial Statements

March 31, 2011

(Unaudited)

(In thousands, except per share amounts)

Note 1Our Business

Stream Global Services, Inc. (Stream, the Company, we, us, or our) is a leading global business process outsourcing (BPO) service
provider specializing in customer relationship management (CRM), including sales, customer care and technical support, for Fortune 1000 companies. Our clients include leading technology, computing, telecommunications, retail,
entertainment/media, and financial services companies. Our service programs are delivered through a set of standardized best practices and sophisticated technologies by a highly skilled multilingual workforce with the ability to support 35
languages across 50 locations in 22 countries. We continue to expand our global presence and service offerings to increase revenue, improve operational efficiencies and drive brand loyalty for our clients.

Note 2Basis of Presentation

Our consolidated financial statements as of March 31, 2011 and December 31, 2010, and for the three months ended March 31, 2011 and 2010 include our accounts and those of our wholly owned
subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Certain
reclassifications have been made in the March 31, 2010 consolidated financial statements to conform to the 2011 financial statement presentation. These reclassifications were recorded to conform to industry practice. The reclassifications have
no impact on net loss.



|                                                |  |                                                           |         |   |                         |  |      |                                                  |  |  |         |  
|----------------------------------------------- |  | --------------------------------------------------------- | ------- | - | ----------------------- |  | ---- | ------------------------------------------------ |  |  | ------- | -
|                                                |  | As previouslyreported inMarch 31, 2010financialstatements |         |   | Reclassificationamounts |  |      | As reported inMarch 31,
2011financial statements | 
|Direct cost of revenue                          |  |                                                           | 112,840 |   |                         |  | (256 | )(1)                                             |  |  | 112,584 |  
|Selling, general and administrative expenses    |  |                                                           | 69,264  |   |                         |  | (699 | )(2)                                             |  |  | 68,565  |  
|Severance, restructuring and other charges, net |  |                                                           | 910     |   |                         |  | 699  | (2)                                              |  |  | 1,609   |  
|Foreign currency loss (gain)                    |  |                                                           | (1,805  | ) |                         |  | 256  | (1)                                              |  |  | (1,549  | )



|(1) | Reclassification of realized gains on effective cash flow hedges from Foreign currency loss (gain) to Direct cost of revenue in our consolidated statement of
operations.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Reclassification of non-agent severance related costs from Selling, general and administrative expenses to Severance, restructuring and other charges, net in our
consolidated statement of operations.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have evaluated subsequent events through May 4, 2011, the date
these financial statements were issued.

Note 3Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying consolidated
condensed financial statements as of March 31, 2011 and for the three months ended March 31, 2011 and 2010 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements
and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of operations and cash flows. The results for the three months ended
March 31, 2011 are not necessarily indicative of the results to be expected for the year ended December 31, 2011, or for any other interim period or future year.

Use of Estimates

The preparation of the consolidated condensed financial
statements in conformity with accounting principles generally accepted in the U.S. (GAAP) requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities, disclosure of contingent
liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On an on-going basis, we evaluate our estimates including those related to derivatives and hedging
activities, income taxes including the valuation allowance for deferred tax assets, valuation of long-lived assets, self-insurance reserves, litigation and restructuring liabilities, and allowance for doubtful accounts. We base our estimates on
historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these
estimates under different assumptions or conditions.



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##### Table of Contents

Foreign Currency Translation and Derivative Instruments

We account for derivative financial instruments utilizing the authoritative guidance. We generally utilize forward contracts expiring
within one to 18 months to reduce our foreign currency exposure due to exchange rate fluctuations on forecasted cash flows denominated in foreign currencies. Upon proper designation, certain of these contracts are accounted for as cash flow
hedges, as defined by the authoritative guidance. These contracts are entered into to protect against the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates. In using derivative
financial instruments to hedge exposures to changes in exchange rates, we expose ourselves to counterparty credit risk. We do not believe that we are exposed to a concentration of credit risk with our derivative financial instruments as the
counterparties are well established institutions and counterparty credit risk information is monitored on an ongoing basis.

All derivatives, including foreign currency forward contracts, are recognized in other current assets on the balance sheet at fair value.
Fair values for our derivative financial instruments are based on quoted market prices of comparable instruments or, if none are available, on pricing models or formulas using current market and model assumptions. On the date the derivative contract
is entered into, we determine whether the derivative contract should be designated as a cash flow hedge. Changes in the fair value of derivatives that are highly effective and designated as cash flow hedges are recorded in accumulated other
comprehensive income (loss), until the forecasted underlying transactions occur. To date we have not experienced any hedge ineffectiveness of our cash flow hedges (except certain cash flow hedges previously determined to be effective, as of
October 1, 2009, the date of the acquisition of EGS Corp., a Philippine corporation (EGS), which have since been designated to be ineffective at that date). Any realized gains or losses resulting from the effective cash flow hedges
are recognized within direct cost of revenue. Cash flows from the derivative contracts are classified within cash flows from operating activities in the accompanying consolidated condensed statement of cash flows. Ineffectiveness is measured based
on the change in fair value of the forward contracts and the fair value of the hypothetical derivatives with terms that match the critical terms of the risk being hedged.

We may also enter into derivative contracts that are intended to economically hedge certain risks, even though we elect not to apply hedge accounting as defined by the authoritative guidance. Changes in
fair value of derivatives not designated as hedges are reported in income as foreign currency loss (gain).

The assets and
liabilities of our foreign subsidiaries whose functional currency is their local currency are translated at the exchange rate in effect on the reporting date, and income and expenses are translated at the average exchange rate during the period. The
net effect of translation gains and losses is not included in determining net income (loss), but is reflected in accumulated other comprehensive income (loss) as a separate component of stockholders equity until the sale or until the
liquidation of the net investment in the foreign subsidiary.

As of March 31, 2011 and December 31, 2010, we had
approximately $227,130 and $233,183, respectively, of foreign exchange risk hedged using forward exchange contracts. As of March 31, 2011, the forward exchange contracts we held were comprised of $148,401 of contracts determined to be effective
cash flow hedges and $78,729 of contracts for which we elected not to apply hedge accounting.

As of March 31, 2011 and
December 31, 2010, the fair market value of those derivative instruments designated as cash flow hedges was a gain of $5,349 and $5,358, respectively. As of March 31, 2011, the fair market value of derivatives for which we elected not to
apply hedge accounting was a gain of $188. As of March 31, 2011, $4,985 of net gains, net of tax, may be reclassified to earnings within the next 12 months based on current foreign exchange rates.

As of March 31, 2011 and 2010, we had realized gains of $1,799 and $360, respectively, on hedges for which we elected to not apply
hedge accounting. As of March 31, 2011 and 2010, we realized gains of $1,551 and $257, respectively, on hedges which were deemed effective cash flow hedges. As of March 31, 2011 and 2010, we realized gains of $298 and $1,482,
respectively, on hedges which were previously determined to be effective cash flow hedges but as of October 1, 2009 were determined to be ineffective. All realized gains resulting from hedges not deemed to be effective for the periods were
reflected in Foreign currency loss (gain) in the Statement of Operations.

Fair Value of Financial Instruments

We implemented the authoritative guidance for our financial assets and liabilities that are re-measured and reported at fair value at each
reporting period and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.



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##### Table of Contents

The following table presents information about our assets and liabilities and indicates the
fair value hierarchy of the valuation techniques we utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values
determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability and includes situations
where there is little, if any, market activity for the asset or liability:



|                           |  |               |       |  |                                         |   |   |                                             |  |   |                                  |  |  |   |   | 
|-------------------------- |  | ------------- | ----- |  | --------------------------------------- | - | - | ------------------------------------------- |  | - | -------------------------------- |  |  | - | - | 
|                           |  | March 31,2011 |       |  | Quoted Prices inActive Markets(Level 1) |   |   | Significant OtherObservableInputs (Level 2) |  |   | SignificantUnobservable(Level 3) | 
|Description                |  |               |       |  |                                         |   |   |                                             |  |   |                                  |  |  |   |   | 
|Forward exchange contracts |  | $             | 5,537 |  |                                         | $ |  |                                             |  | $ | 5,537                            |  |  | $ |  | 
|                           |  |               |       |  |                                         |   |   |                                             |  |   |                                  |  |  |   |   | 
|Total                      |  | $             | 5,537 |  |                                         | $ |  |                                             |  | $ | 5,537                            |  |  | $ |  | 

The fair values of
our forward exchange contracts are determined through market, observable and corroborated sources.

The carrying amounts
reflected in the consolidated balance sheets for other current assets, accounts payable, and accrued expenses approximate fair value due to their short-term maturities. To the extent we have any outstanding borrowings under our revolving credit
facility, the fair value would approximate its reported value because the interest rate is variable and reflects current market rates.

Net
Income (Loss) Per Share

The following common stock equivalents were excluded from computing diluted net loss per share
attributable to common stockholders because they had an anti-dilutive impact:



|                                                                                 |  |                                  |        |  |                                  |  |        | 
|-------------------------------------------------------------------------------- |  | -------------------------------- | ------ |  | -------------------------------- |  | ------ | 
|                                                                                 |  | Three months endedMarch 31, 2011 |        |  | Three months endedMarch 31, 2010 | 
|Options to purchase common stock at $6.00 per share                              |  |                                  | 6,686  |  |                                  |  | 8,054  | 
|Pre-emptive rights at $6.00 per share                                            |  |                                  | 17,849 |  |                                  |  | 23,979 | 
|Publicly held warrants at $6.00 per share                                        |  |                                  | 7,326  |  |                                  |  | 9,842  | 
|Restricted stock units                                                           |  |                                  | 249    |  |                                  |  | 728    | 
|                                                                                 |  |                                  |        |  |                                  |  |        | 
|Total options, warrants and restricted stock units exercisable into common stock |  |                                  | 32,110 |  |                                  |  | 42,603 | 

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (FASB) issued guidance to amend the disclosure
requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities)
and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuances,
and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for us with the reporting period beginning January 1, 2010, except for the requirement
to separately disclose purchases, sales, issuances and settlements of recurring Level 3 fair value measurements which became effective January 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a
material impact on our financial statements.

On September 23, 2009, the FASB ratified Emerging Issues Task Force (EITF)
Issue 08-1 and EITF Issue 09-3, resulting in the issuance of accounting standard updates ASU 2009-13 and ASU 2009-14. We adopted the new accounting standards January 1, 2011. Under the new guidance, when vendor specific objective evidence or
third party evidence for multi-element deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The
new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. The adoption of the new accounting standards had no effect to our revenue recognition
policy.

Note 4Goodwill and Intangibles

Goodwill

We evaluate goodwill for impairment annually and whenever events
or changes in circumstances suggest that the carrying value of goodwill may not be recoverable. No impairment of goodwill resulted from our most recent evaluation of goodwill for impairment, which occurred in the fourth quarter of fiscal 2010, or in
any of the periods presented. Our next annual impairment assessment will be made in the fourth quarter of 2011.



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Intangible Assets

We review identified intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Recoverability of these assets is
measured by comparison of their carrying value to future undiscounted cash flows the assets are expected to generate over their remaining economic lives. If such assets are considered to be impaired, the impairment to be recognized in the statement
of operations equals the amount by which the carrying value of the assets exceeds their fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique.

Intangibles and amortization

Intangible assets at March 31, 2011 consisted of the following:



|                                   |  |                      |                |  |                              |  |            |           |  |   |                         |  |  |     |        |  |  |   |        | 
|---------------------------------- |  | -------------------- | -------------- |  | ---------------------------- |  | ---------- | --------- |  | - | ----------------------- |  |  | --- | ------ |  |  | - | ------ | 
|                                   |  | Estimateduseful life |                |  | Weightedaverageremaininglife |  |            | Grosscost |  |   | Accumulatedamortization |  |  | Net |       
|Customer relationships             |  |                      | Up to 10 years |  |                              |  | 6.5        |           |  | $ | 98,749                  |  |  | $   | 36,982 |  |  | $ | 61,767 | 
|Technology-based intangible assets |  |                      | 5 years        |  |                              |  | 2.4        |           |  |   | 2,412                   |  |  |     | 998    |  |  |   | 1,414  | 
|Trade names                        |  |                      | indefinite     |  |                              |  | indefinite |           |  |   | 16,197                  |  |  |     | 97     |  |  |   | 16,100 | 
|                                   |  |                      |                |  |                              |  |            |           |  |   |                         |  |  |     |        |  |  |   |        | 
|                                   |  |                      |                |  |                              |  |            |           |  | $ | 117,358                 |  |  | $   | 38,077 |  |  | $ | 79,281 | 

Future amortization
expense of our intangible assets for the next five years is expected to be as follows:



|             |  |                  |  |         |  |         |  |        |  |        |  |       
|------------ |  | ---------------- |  | ------- |  | ------- |  | ------ |  | ------ |  | ------
|             |  | Remainder of2011 |  | 2012    |  | 2013    |  | 2014   |  | 2015   |  | 2016  
|Amortization |  | $12,610          |  | $14,331 |  | $11,497 |  | $7,571 |  | $5,652 |  | $4,435

Note 5Warrants

Pursuant to our IPO, we sold 31,250 units, each consisting of one share of our common stock and one warrant entitling the holder to purchase one share of our common stock at an exercise price of $6.00 per
share.

The warrants became exercisable beginning on October 17, 2008 and will expire on October 17, 2011, unless
redeemed earlier. We may redeem the warrants at a price of $0.01 per warrant upon 30 days prior written notice of redemption if the last sales price of our common stock equals or exceeds $11.50 per share for any 20 trading days within a 30 trading
day period ending three business days before we send the notice of redemption.

During the three months ended March 31,
2011 and 2010, holders of our publicly traded warrants exercised zero and 167 warrants, respectively.

As of March 31,
2011, Stream had 7,357 public warrants outstanding, including 31 warrants embedded in our units, to acquire common stock at a cash exercise price of $6.00 per share that expire on October 17, 2011. The exercise of our public warrants triggers
certain participation rights held by the following shareholders: Ares Management, Ayala Corporation and Providence Equity Partners (collectively, the Participating Stockholders). The Participating Stockholders have participation rights
to purchase in the aggregate, for $6.00 per share, such number of shares of our common stock equal to 2.4364 multiplied by the number of shares issued upon exercise of the public warrants up to a maximum of 17,925 shares. These participation rights
expire when the public warrants expire on October 17, 2011 and are reduced pro rata as the numbers of public warrants outstanding are reduced.

Note 6 Severance, Restructuring and Other Charges

During the three months ended March 31, 2011 we recorded a net benefit of $126 primarily related to the reversal of a previously
recorded lease exit reserve partially offset by charges related to changes in leadership and management positions within the company. During the three months ended March 31, 2010 we recorded a charge of $1,609 primarily related to acquisition
related expenses and charges related to changes in leadership and management positions within the company.



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Severance, restructuring and other charges, net, consist of the following:



|                                                |  |               |      |   |               |   |       | 
|----------------------------------------------- |  | ------------- | ---- | - | ------------- | - | ----- | 
|                                                |  | March 31,2011 |      |   | March 31,2010 |  
|Severance related to changes in leadership      |  | $             | 537  |   |               | $ | 699   | 
|(Reversal) establishment of lease exit reserve  |  |               | (858 | ) |               |   | 522   | 
|Transaction related expenses                    |  |               |     |   |               |   | 388   | 
|Other                                           |  |               | 195  |   |               |   |      | 
|                                                |  |               |      |   |               |   |       | 
|Severance, restructuring and other charges, net |  | $             | (126 | ) |               | $ | 1,609 | 

Note 7Equipment and Fixtures, Net

Equipment and fixtures, net, consist of the following:



|                                                 |  |               |         |   |                  |   |         |  
|------------------------------------------------ |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                 |  | March 31,2011 |         |   | December 31,2010 |  
|Furniture and fixtures                           |  | $             | 11,599  |   |                  | $ | 11,161  |  
|Building improvements                            |  |               | 38,911  |   |                  |   | 36,196  |  
|Computer equipment                               |  |               | 40,410  |   |                  |   | 37,200  |  
|Software                                         |  |               | 23,137  |   |                  |   | 21,935  |  
|Telecom and other equipment                      |  |               | 47,676  |   |                  |   | 46,519  |  
|Equipment and fixtures not yet placed in service |  |               | 1,475   |   |                  |   | 1,232   |  
|                                                 |  |               |         |   |                  |   |         |  
|                                                 |  |               | 163,208 |   |                  |   | 154,243 |  
|Less: accumulated depreciation                   |  |               | (85,538 | ) |                  |   | (73,384 | )
|                                                 |  |               |         |   |                  |   |         |  
|                                                 |  | $             | 77,670  |   |                  | $ | 80,859  |  

Note 8Accrued Employee Compensation and Benefits

Accrued employee compensation and benefits consist of the following:



|                                  |  |               |        |  |                  |   |        | 
|--------------------------------- |  | ------------- | ------ |  | ---------------- | - | ------ | 
|                                  |  | March 31,2011 |        |  | December 31,2010 |  
|Compensation related amounts      |  | $             | 28,162 |  |                  | $ | 31,805 | 
|Vacation liabilities              |  |               | 14,964 |  |                  |   | 12,646 | 
|Medical and dental liabilities    |  |               | 2,228  |  |                  |   | 1,860  | 
|Employer taxes                    |  |               | 3,075  |  |                  |   | 2,825  | 
|Retirement plans                  |  |               | 7,839  |  |                  |   | 8,146  | 
|Other benefit related liabilities |  |               | 2,608  |  |                  |   | 2,515  | 
|                                  |  |               |        |  |                  |   |        | 
|                                  |  | $             | 58,876 |  |                  | $ | 59,797 | 

Note 9Other Accrued Expenses and Other Liabilities

Other accrued expenses consist of the following:



|                       |  |               |        |  |                  |   |        | 
|---------------------- |  | ------------- | ------ |  | ---------------- | - | ------ | 
|                       |  | March 31,2011 |        |  | December 31,2010 |  
|Professional fees      |  | $             | 6,159  |  |                  | $ | 7,151  | 
|Accrued interest       |  |               | 11,507 |  |                  |   | 5,921  | 
|Occupancy expense      |  |               | 2,055  |  |                  |   | 2,250  | 
|Technology expense     |  |               | 2,792  |  |                  |   | 3,116  | 
|Other accrued expenses |  |               | 9,595  |  |                  |   | 11,551 | 
|                       |  |               |        |  |                  |   |        | 
|                       |  | $             | 32,108 |  |                  | $ | 29,989 | 



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##### Table of Contents

Other liabilities consist of the following:



|                                                      |  |               |        |  |                  |   |        | 
|----------------------------------------------------- |  | ------------- | ------ |  | ---------------- | - | ------ | 
|                                                      |  | March 31,2011 |        |  | December 31,2010 |  
|Lease exit liability                                  |  | $             | 686    |  |                  | $ | 1,743  | 
|Deferred revenue                                      |  |               | 517    |  |                  |   | 365    | 
|Market lease reserves                                 |  |               | 3,673  |  |                  |   | 3,930  | 
|Other                                                 |  |               | 1,125  |  |                  |   | 1,034  | 
|                                                      |  |               |        |  |                  |   |        | 
|Total current liabilities                             |  | $             | 6,001  |  |                  | $ | 7,072  | 
|Other long-term liabilities consist of the following: |  |               |        |  |                  |   |        | 
|Deferred rent                                         |  |               | 1,427  |  |                  |   | 1,433  | 
|Accrued income taxes                                  |  |               | 12,665 |  |                  |   | 12,268 | 
|Market value lease reserves                           |  |               | 2,128  |  |                  |   | 2,750  | 
|Asset retirement obligation                           |  |               | 2,137  |  |                  |   | 2,053  | 
|Other                                                 |  |               | 773    |  |                  |   | 1,627  | 
|                                                      |  |               |        |  |                  |   |        | 
|Total other long-term liabilities                     |  | $             | 19,130 |  |                  | $ | 20,131 | 

Note 10Long-Term Debt and Revolving Credit Facility

We and certain of our subsidiaries (collectively, the Borrowers) entered into a credit agreement, dated as of October 1,
2009 (the Credit Agreement), with Wells Fargo Foothill, LLC, as agent and co-arranger, and Goldman Sachs Lending Partners LLC, as co-arranger, and each of the lenders party thereto, as lenders, providing for revolving credit financing
(the Revolving Line of Credit) of up to $100,000, including a $20,000 sub-limit for letters of credit. The Revolving Line of Credit has a maturity of four years at an interest rate of either Wells Fargos base rate plus 375 basis
points or LIBOR plus 400 basis points, at our discretion. We capitalized fees of $7,815 and $3,929 associated with the $200,000 aggregate principal amount of 11.25% Senior Secured Notes due 2014, which were issued on October 1, 2009 (the
Notes) and the Credit Agreement, respectively, at the inception of these agreements that are being amortized over their respective lives. For the three months ended March 31, 2011, we amortized $577 of such capitalized fees.

The Revolving Line of Credit has a fixed charge coverage ratio financial covenant that is operative when our availability
under the facility is less than $20,000. As of March 31, 2011, we had $83,536 available under the Revolving Line of Credit. We were in compliance with the financial covenants in the Credit Agreement as of March 31, 2011. Substantially all
of our assets, excluding intangible assets, secure the Notes and the Revolving Line of Credit. See Note 15 for Guarantor Financial Information.

Long-term borrowings consist of the following:



|                                |  |               |         |   |                  |   |         |  
|------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                |  | March 31,2011 |         |   | December 31,2010 |  
|Revolving line of credit        |  | $             | 10,000  |   |                  | $ | 24,506  |  
|11.25% Senior Secured Notes     |  |               | 200,000 |   |                  |   | 200,000 |  
|Other                           |  |               | 124     |   |                  |   | 147     |  
|                                |  |               |         |   |                  |   |         |  
|                                |  |               | 210,124 |   |                  |   | 224,653 |  
|Less: current portion           |  |               | (98     | ) |                  |   | (96     | )
|Less: discount on notes payable |  |               | (6,974  | ) |                  |   | (7,358  | )
|                                |  |               |         |   |                  |   |         |  
|Long-term debt                  |  | $             | 203,052 |   |                  | $ | 217,199 |  
|                                |  |               |         |   |                  |   |         |  

Minimum principal payments on long-term debt subsequent to March 31, 2011 are as follows:



|      |  |       |         | 
|----- |  | ----- | ------- | 
|      |  | Total |        
|2011  |  | $     | 98      | 
|2012  |  |       | 26      | 
|2013  |  |       | 10,000  | 
|2014  |  |       | 200,000 | 
|      |  |       |         | 
|Total |  | $     | 210,124 | 
|      |  |       |         | 

We had Letters of Credit in the aggregate outstanding amount of $6,464 at March 31, 2011 and $6,936 at
December 31, 2010, respectively.

We have $221 and $161 of restricted cash as of March 31, 2011 and
December 31, 2010, respectively.



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##### Table of Contents

Note 11Income Taxes

The domestic and foreign source component of loss before taxes is as follows:



|              |  |               |         |   |               |   |         |  
|------------- |  | ------------- | ------- | - | ------------- | - | ------- | -
|              |  | March 31,2011 |         |   | March 31,2010 |  
|Total US      |  | $             | (10,311 | ) |               | $ | (18,231 | )
|Total Foreign |  |               | 9,281   |   |               |   | 9,566   |  
|              |  |               |         |   |               |   |         |  
|Total         |  | $             | (1,030  | ) |               | $ | (8,665  | )

The provision for income
taxes for the three months ended March 31, 2011 and 2010 relate primarily to the foreign source component of loss before tax. Our operations in countries outside the United States are generally taxed at lower statutory rates and also
benefit from tax holidays. The decrease in foreign tax expense for the three months ended March 31, 2011 was primarily due to the previously unrecognized benefit related to the current period receipt of a tax refund in a foreign
jurisdiction.

We file income tax returns in the U.S. federal jurisdiction and various state and foreign tax jurisdictions.
Currently, we are under audit for the 2007 tax year for EGS in the U.S. federal jurisdiction. We operate in a number of international tax jurisdictions and are subject to audits of income tax returns by tax authorities in those jurisdictions. We are
currently under audit in India, the Philippines, Canada, Italy, and Spain.

As of March 31, 2011 and December 31,
2010, the liability for unrecognized tax benefits (including interest and penalties) was $13,621 and $13,227, respectively, of which $12,665 and $12,268, respectively, was recorded within other long term liabilities in our consolidated financial
statements. Included in these amounts is approximately $1,599 of un-benefitted tax losses which would be realized if the related uncertain tax positions were settled. As of December 31, 2010, we had reserved $2,635 for accrued interest and
penalties, which increased to $2,880 as of March 31, 2011. We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision. The total amount of net unrealized tax benefits that would affect the
income tax expense, if ever recognized in our consolidated financial statements, is $12,762. This amount includes interest and penalties of $2,880. We estimate that within the next 12 months, our unrecognized tax benefits, and interest and penalties
could decrease as a result of settlements with taxing authorities or the expiration of the statute of limitations by $1,580 and $984, respectively.

Note 12Stock Options

The 2008 Stock Incentive Plan (the Plan) provides for the grant of incentive and nonqualified stock options. The Plan has authorized grants of up to 10,000 shares of common stock at an
exercise price not less than 100% of the fair value of the common stock at the date of grant. The Plan provides that the options shall have a term not to exceed ten years from the grant date. During the three months ended March 31, 2011 and
2010, we granted options to purchase 770 and 1,670, respectively, shares of our common stock to our employees. Generally, options vest over a five-year period.

During the three-month period ended March 31, 2011 and 2010, 2,328 and 844, respectively, stock option grants were vested, zero and 21,500, respectively, were exercised, and 392 and 572,
respectively, were forfeited.

The per share fair value of options granted was determined using the Black-Scholes-Merton
model.

The following assumptions were used for the option grants in the quarter ended March 31, 2011 and 2010:



|                                                          |  |                                 |           |   |                                 |   |           |  
|--------------------------------------------------------- |  | ------------------------------- | --------- | - | ------------------------------- | - | --------- | -
|                                                          |  | Three months endedMarch 31,2011 |           |   | Three months endedMarch 31,2010 |  
|Option term (years)                                       |  |                                 | 6.38      |   |                                 |   | 6.375     |  
|Volatility                                                |  |                                 | 67.15     | % |                                 |   | 64        | %
|Risk-free interest rate                                   |  |                                 | 2.38-2.47 | % |                                 |   | 2.6  2.9 | %
|Dividend yield                                            |  |                                 | 0         | % |                                 |   | 0         | %
|Weighted-average grant date fair value per option granted |  | $                               | 1.86      |   |                                 | $ | 3.90      |  

The option term was
calculated under the simplified method for all option grants issued during the quarters ended March 31, 2011 and 2010 as we do not have a long history of granting options. The volatility assumption is based on a weighted average of the
historical volatilities for Stream and its peer group. The risk-free interest rate assumption was based upon the implied yields from the U.S. Treasury zero-coupon yield curve with a remaining term equal to the expected term in options. The expected
term of employee stock options granted was based on our estimated life of the options at the grant date.



11



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##### Table of Contents

Stock options under the Plan during the three months ended March 31, 2011 were as follows:



|                                 |  |                  |       |  |                              |   |      |                          |  |   |                                                |  |  |  |      | 
|-------------------------------- |  | ---------------- | ----- |  | ---------------------------- | - | ---- | ------------------------ |  | - | ---------------------------------------------- |  |  |  | ---- | 
|                                 |  | Numberof options |       |  | WeightedAverageExercisePrice |   |      | WeightedAverageFairValue |  |   | WeightedAverageRemainingContractualTerm(Years) | 
|Outstanding at December 31, 2010 |  |                  | 6,308 |  |                              | $ | 6.13 |                          |  |   |                                               |  |  |  | 7.64 | 
|Granted                          |  |                  | 770   |  |                              |   | 5.26 |                          |  | $ | 1.86                                           |  |  |  |      | 
|Exercised                        |  |                  |      |  |                              |   |     |                          |  |   |                                                |  |  |  |      | 
|Forfeited or canceled            |  |                  | 392   |  |                              |   | 6.17 |                          |  |   |                                                |  |  |  |      | 
|                                 |  |                  |       |  |                              |   |      |                          |  |   |                                                |  |  |  |      | 
|Outstanding at March 31, 2011    |  |                  | 6,686 |  |                              | $ | 6.03 |                          |  |   |                                                |  |  |  | 7.63 | 

At March 31,
2011, stock options to purchase 1,728 shares with a weighted-average exercise price of $6.11 were exercisable. The weighted average remaining contractual term of options exercisable at March 31, 2011 was 5.48 years. The total fair value of
options vested during the three months ended March 31, 2011 was $666. On March 31, 2011, there were 5,272 shares outstanding, vested, and expected to vest (including forfeiture adjusted unvested shares) with a weighted average exercise
price of $6.05 and a weighted average remaining contractual term of 7.29 years.

For the three months ended March 31,
2011 and 2010, we recognized net stock compensation expense of $642 and $1,144, respectively, for the stock options in the table above.

As of March 31, 2011 and December 31, 2010, the aggregate intrinsic value (i.e., the difference in the estimated fair value of our common stock and the exercise price to be paid by the option
holder) of stock options outstanding, excluding the effects of expected forfeitures, was zero. The aggregate intrinsic value of the shares of exercisable stock options at March 31, 2011 and December 31, 2010 was zero. The intrinsic value
of options exercised for the three months ended March 31, 2011 and 2010, was zero and $10, respectively.

As of
March 31, 2011 and December 31, 2010, there was $7,147 and $7,203, respectively, of unrecognized compensation cost related to the unvested portion of time-based arrangements granted under the Plan. That cost is expected to be recognized
over a weighted-average period of 3.70 years from issue date.

Restricted stock award activity during the three months ended
March 31, 2011 was as follows:



|                           |  |                 |     |  |                                      |   |      | 
|-------------------------- |  | --------------- | --- |  | ------------------------------------ | - | ---- | 
|                           |  | Number ofShares |     |  | WeightedaverageGrant-Date Fair Value |  
|Unvested December 31, 2010 |  |                 | 399 |  |                                      | $ | 6.37 | 
|Granted                    |  |                 |    |  |                                      |   |     | 
|Vested                     |  |                 | 10  |  |                                      |   | 6.11 | 
|Forfeited                  |  |                 | 61  |  |                                      |   | 6.30 | 
|                           |  |                 |     |  |                                      |   |      | 
|Unvested March 31, 2011    |  |                 | 328 |  |                                      | $ | 6.39 | 

For the three months
ended March 31, 2011 and 2010, we recognized net compensation expense of $103 and $185, respectively, for the restricted stock awards. Restricted stock awards vest either quarterly over four years for grants in 2008 or semi-annually over five
years for grants after 2008.

Note 13Contingencies

We are subject to various lawsuits and claims in the normal course of business. In addition, from time to time, we receive communications from government or regulatory agencies concerning investigations
or allegations of non-compliance with laws or regulations in jurisdictions in which we operate. Although the ultimate outcome of such lawsuits, claims and investigations cannot be ascertained, we believe, on the basis of present information, that
the disposition or ultimate resolution of such claims, lawsuits and/or investigations will not have a material adverse effect on our business, results of operations or financial condition. We establish specific liabilities in connection with
regulatory and legal actions that we deem to be probable and estimable, and we believe that our reserves for such liabilities are adequate.

We have been named as a third-party defendant in a putative class action captioned Kambiz Batmanghelich, on behalf of himself and all others similarly situated and on behalf of the general public, v.
Sirius XM Radio, Inc., filed in the Los Angeles County Superior Court on November 10, 2009, and removed to the United States District Court for the Central District of California. The Plaintiff alleges that Sirius XM Radio, Inc. recorded
telephone conversations between Plaintiff and members of the proposed class of



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Sirius customers, on the one hand, and Sirius and its employees, on the other, without the Plaintiffs and class members consent in violation of Californias telephone
recording laws. The Plaintiff also alleges negligence and violation of the common law right of privacy, and seeks injunctive relief. We believe that we have meritorious defenses and we intend to vigorously defend against these claims. On
December 21, 2009, Sirius XM Radio, Inc. filed a Third-Party Complaint in the action against us seeking indemnification for any defense costs and damages that result from the putative class action. On March 25, 2010, the Plaintiff filed an
amended complaint that added us as a defendant. In March 2011, the court granted preliminary approval of a settlement proposal, conditionally certified the settlement class, and approved the form of class notice. Final approval of the settlement
must still be granted by the court, following the process set forth in the courts preliminary approval order.

Note 14Geographic Operations and Concentrations

We operate in one operating segment and provide services primarily in two regions: Americas, which includes the United States,
Canada, the Philippines, India, Costa Rica, Nicaragua, the Dominican Republic, and El Salvador; and EMEA, which includes Europe, the Middle East, and Africa.

The following table presents geographic information regarding our operations:



|              |  |                                 |         |  |                                  |   |         | 
|------------- |  | ------------------------------- | ------- |  | -------------------------------- | - | ------- | 
|              |  | Three MonthsEndedMarch 31, 2011 |         |  | Three MonthsEndedMarch 
31, 2010 |  
|Revenues      |  |                                 |         |  |                                  |   |         | 
|Americas      |  | $                               | 154,263 |  |                                  | $ | 143,332 | 
|EMEA          |  |                                 | 58,428  |  |                                  |   | 53,243  | 
|              |  |                                 |         |  |                                  |   |         | 
|              |  | $                               | 212,691 |  |                                  | $ | 196,575 | 
|              |  |                                
|              |  | March 31, 2011                  |         |  | December 31, 2010                |  
|Total assets: |  |                                 |         |  |                                  |   |         | 
|Americas      |  | $                               | 554,000 |  |                                  | $ | 569,325 | 
|EMEA          |  |                                 | 84,520  |  |                                  |   | 78,660  | 
|              |  |                                 |         |  |                                  |   |         | 
|              |  | $                               | 638,520 |  |                                  | $ | 647,985 | 

We derive significant
revenues from three significant clients. At March 31, 2011, three of our largest clients are global computer companies. The percentage of revenue for each of these clients is as follows:



|                |  |                                |    |   |                                |  |    |  
|--------------- |  | ------------------------------ | -- | - | ------------------------------ |  | -- | -
|                |  | Three MonthsEndedMarch 31,2011 |    |   | Three MonthsEndedMarch 31,2010 | 
|Dell            |  |                                | 14 | % |                                |  | 19 | %
|Hewlett-Packard |  |                                | 10 | % |                                |  | 15 | %
|Microsoft       |  |                                | 9  | % |                                |  | 2  | %

Related accounts
receivable from these three clients were 20%, 10% and 5%, respectively, of our total accounts receivable at March 31, 2011.



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Note 15Guarantor Financial Information (Unaudited)

The Notes are guaranteed by Stream, which is our parent company, along with certain of our wholly owned subsidiaries. Such guarantees are
full, unconditional and joint and several. Condensed consolidating financial information related to Stream, our guarantor subsidiaries and our non-guarantor subsidiaries as of March 31, 2011 are reflected below:

Condensed Consolidating Statement of Operations

For the three months ended March 31, 2011



|                                     |  |        |        |   |                       |   |         |                           |  |   |             |  |  |       |         |   |  |   |         |  
|------------------------------------ |  | ------ | ------ | - | --------------------- | - | ------- | ------------------------- |  | - | ----------- |  |  | ----- | ------- | - |  | - | ------- | -
|                                     |  | Parent |        |   | Guarantorsubsidiaries |   |         | Non-Guarantorsubsidiaries |  |   | Elimination |  |  | Total |        
|Net revenue:                         |  |        |        |   |                       |   |         |                           |  |   |             |  |  |       |         |   |  |   |         |  
|Customers                            |  | $      |       |   |                       | $ | 171,376 |                           |  | $ | 41,315      |  |  | $     |        |   |  | $ | 212,691 |  
|Intercompany                         |  |        |       |   |                       |   | 22,427  |                           |  |   | 75,831      |  |  |       | (98,258 | ) |  |   |        |  
|                                     |  |        |        |   |                       |   |         |                           |  |   |             |  |  |       |         |   |  |   |         |  
|                                     |  |        |       |   |                       |   | 193,803 |                           |  |   | 117,146     |  |  |       | (98,258 | ) |  |   | 212,691 |  
|Direct cost of revenue               |  |        |        |   |                       |   |         |                           |  |   |             |  |  |       |         |   |  |   |         |  
|Customers                            |  |        |       |   |                       |   | 56,811  |                           |  |   | 65,142      |  |  |       |         |   |  |   | 121,953 |  
|Intercompany                         |  |        |       |   |                       |   | 88,996  |                           |  |   | 9,262       |  |  |       | (98,258 | ) |  |   |        |  
|                                     |  |        |        |   |                       |   |         |                           |  |   |             |  |  |       |         |   |  |   |         |  
|                                     |  |        |       |   |                       |   | 145,807 |                           |  |   | 74,404      |  |  |       | (98,258 | ) |  |   | 121,953 |  
|Gross Profit                         |  |        |       |   |                       |   | 47,996  |                           |  |   | 42,742      |  |  |       |        |   |  |   | 90,738  |  
|Operating expenses                   |  |        | 833    |   |                       |   | 47,152  |                           |  |   | 35,276      |  |  |       |        |   |  |   | 83,261  |  
|Non-operating expenses               |  |        | 6,778  |   |                       |   | (2,667  | )                         |  |   | 4,396       |  |  |       |        |   |  |   | 8,507   |  
|Equity in Earnings of Subsidiaries   |  |        | (5,516 | ) |                       |   |        |                           |  |   |            |  |  |       | 5,516   |   |  |   |        |  
|                                     |  |        |        |   |                       |   |         |                           |  |   |             |  |  |       |         |   |  |   |         |  
|Income (loss) before income taxes    |  |        | (2,095 | ) |                       |   | 3,511   |                           |  |   | 3,070       |  |  |       | (5,516  | ) |  |   | (1,030  | )
|                                     |  |        |        |   |                       |   |         |                           |  |   |             |  |  |       |         |   |  |   |         |  
|Provision (benefit) for income taxes |  |        |       |   |                       |   | 199     |                           |  |   | 866         |  |  |       |        |   |  |   | 1,065   |  
|                                     |  |        |        |   |                       |   |         |                           |  |   |             |  |  |       |         |   |  |   |         |  
|Net income (loss)                    |  | $      | (2,095 | ) |                       | $ | 3,312   |                           |  | $ | 2,204       |  |  | $     | (5,516  | ) |  | $ | (2,095  | )
|                                     |  |        |        |   |                       |   |         |                           |  |   |             |  |  |       |         |   |  |   |         |  



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Condensed Consolidating Balance Sheet

As of March 31, 2011



|                                             |  |        |         |  |                       |   |         |                           |  |   |             |  |  |       |          |   |  |   |         | 
|-------------------------------------------- |  | ------ | ------- |  | --------------------- | - | ------- | ------------------------- |  | - | ----------- |  |  | ----- | -------- | - |  | - | ------- | 
|                                             |  | Parent |         |  | Guarantorsubsidiaries |   |         | Non-Guarantorsubsidiaries |  |   | Elimination |  |  | Total |         
|Assets                                       |  |        |         |  |                       |   |         |                           |  |   |             |  |  |       |          |   |  |   |         | 
|Cash and cash equivalents                    |  | $      | 6       |  |                       | $ | 4,344   |                           |  | $ | 20,464      |  |  | $     |         |   |  | $ | 24,814  | 
|Accounts receivable, net                     |  |        |        |  |                       |   | 138,776 |                           |  |   | 29,802      |  |  |       |         |   |  |   | 168,578 | 
|Other Current Assets                         |  |        | 2,420   |  |                       |   | 26,360  |                           |  |   | 12,354      |  |  |       |         |   |  |   | 41,134  | 
|                                             |  |        |         |  |                       |   |         |                           |  |   |             |  |  |       |          |   |  |   |         | 
|Total current assets                         |  |        | 2,426   |  |                       |   | 169,480 |                           |  |   | 62,620      |  |  |       |         |   |  |   | 234,526 | 
|Equipment and fixtures, net and other assets |  |        | 6,026   |  |                       |   | 45,195  |                           |  |   | 46,743      |  |  |       |         |   |  |   | 97,964  | 
|Investment in Subsidiary                     |  |        | 457,748 |  |                       |   | 72,532  |                           |  |   | 17          |  |  |       | (530,297 | ) |  |   |        | 
|Goodwill and intangible assets, net          |  |        |        |  |                       |   | 186,679 |                           |  |   | 119,351     |  |  |       |         |   |  |   | 306,030 | 
|                                             |  |        |         |  |                       |   |         |                           |  |   |             |  |  |       |          |   |  |   |         | 
|Total assets                                 |  | $      | 466,200 |  |                       | $ | 473,886 |                           |  | $ | 228,731     |  |  | $     | (530,297 | ) |  | $ | 638,520 | 
|                                             |  |        |         |  |                       |   |         |                           |  |   |             |  |  |       |          |   |  |   |         | 
|Liabilities and Stockholders Equity         |  |        |         |  |                       |   |         |                           |  |   |             |  |  |       |          |   |  |   |         | 
|Current liabilities                          |  | $      | 805     |  |                       | $ | (7,528  | )                         |  | $ | 129,646     |  |  | $     |         |   |  | $ | 122,923 | 
|Long-term liabilities                        |  |        | 203,026 |  |                       |   | 41,345  |                           |  |   | 8,857       |  |  |       |         |   |  |   | 253,228 | 
|Total shareholders equity (deficit)         |  |        | 262,369 |  |                       |   | 440,069 |                           |  |   | 90,228      |  |  |       | (530,297 | ) |  |   | 262,369 | 
|                                             |  |        |         |  |                       |   |         |                           |  |   |             |  |  |       |          |   |  |   |         | 
|Total liabilities and stockholders equity   |  | $      | 466,200 |  |                       | $ | 473,886 |                           |  | $ | 228,731     |  |  | $     | (530,297 | ) |  | $ | 638,520 | 
|                                             |  |        |         |  |                       |   |         |                           |  |   |             |  |  |       |          |   |  |   |         | 



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Condensed Statements of Cash Flows

For the three months ended March 31, 2011



|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |             |   |  |       |   |  |  |   |         |  
|-------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----------- | - |  | ----- | - |  |  | - | ------- | -
|                                                                                       |  | Parent |         |   | Guarantorsubsidiaries |   |         | Non-Guarantorsubsidiaries |  |   | Elimination |   |  | Total |  
|Net cash provided by (used in) operating activities                                    |  | $      | (315    | ) |                       | $ | 19,013  |                           |  | $ | 8,115       |   |  | $     |  |  |  | $ | 26,813  |  
|Cash Flows from investing activities:                                                  |  |        |         |   |                       |   |         |                           |  |   |             |   |  |       |   |  |  |   |         |  
|Investment in Subsidiary                                                               |  |        |        |   |                       |   | (1,600  | )                         |  |   | 1,600       |   |  |       |  |  |  |   |        |  
|Additions to equipment and fixtures, net                                               |  |        |        |   |                       |   | (2,682  | )                         |  |   | (2,419      | ) |  |       |  |  |  |   | (5,101  | )
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |             |   |  |       |   |  |  |   |         |  
|Net cash provided by (used in) investing activities                                    |  |        |        |   |                       |   | (4,282  | )                         |  |   | (819        | ) |  |       |  |  |  |   | (5,101  | )
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |             |   |  |       |   |  |  |   |         |  
|Cash Flows from financing activities:                                                  |  |        |         |   |                       |   |         |                           |  |   |             |   |  |       |   |  |  |   |         |  
|Net borrowings (repayments) on line of credit                                          |  |        | (14,506 | ) |                       |   |        |                           |  |   |            |   |  |       |  |  |  |   | (14,506 | )
|Net borrowings (repayments) on long term debt                                          |  |        |        |   |                       |   | (24     | )                         |  |   |            |   |  |       |  |  |  |   | (24     | )
|Net borrowings (repayments) on capital leases                                          |  |        |        |   |                       |   | (1,835  | )                         |  |   | (611        | ) |  |       |  |  |  |   | (2,446  | )
|Net Intercompany                                                                       |  |        | 14,835  |   |                       |   | (9,098  | )                         |  |   | (5,737      | ) |  |       |  |  |  |   |        |  
|Proceeds from issuance of common stock related to pre-emptive rights and stock options |  |        |        |   |                       |   |        |                           |  |   |            |   |  |       |  |  |  |   |        |  
|Tax withholding on Restricted Stock                                                    |  |        | (14     | ) |                       |   |        |                           |  |   |            |   |  |       |  |  |  |   | (14     | )
|Proceeds from exercise of warrants                                                     |  |        |        |   |                       |   |        |                           |  |   |            |   |  |       |  |  |  |   |        |  
|Re-purchase of warrants                                                                |  |        |        |   |                       |   |        |                           |  |   |            |   |  |       |  |  |  |   |        |  
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |             |   |  |       |   |  |  |   |         |  
|Net cash provided by financing activities                                              |  |        | 315     |   |                       |   | (10,957 | )                         |  |   | (6,348      | ) |  |       |  |  |  |   | (16,990 | )
|Effect of exchange rates on cash and cash equivalents                                  |  |        |        |   |                       |   | (1,861  | )                         |  |   | 3,464       |   |  |       |  |  |  |   | 1,603   |  
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |             |   |  |       |   |  |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                   |  |        |        |   |                       |   | 1,913   |                           |  |   | 4,412       |   |  |       |  |  |  |   | 6,325   |  
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |             |   |  |       |   |  |  |   |         |  
|Cash and cash equivalents, beginning of period                                         |  |        | 6       |   |                       |   | 2,431   |                           |  |   | 16,052      |   |  |       |  |  |  |   | 18,489  |  
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |             |   |  |       |   |  |  |   |         |  
|Cash and cash equivalents, end of period                                               |  | $      | 6       |   |                       | $ | 4,344   |                           |  | $ | 20,464      |   |  | $     |  |  |  | $ | 24,814  |  
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |             |   |  |       |   |  |  |   |         |  



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Note 16Subsequent Events

On April 28, 2011, we commenced a reduction in our workforce of approximately 140 non-agent positions and we expect to incur approximately $3 million of severance related costs.



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as may, should, could, would,
expect, intend, plan, target, goal, anticipate, believe, estimate, continue, or the negative of such terms or other similar expressions. Factors
that might cause or contribute to such a discrepancy include, but are not limited to, those described in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on
March 2, 2011.

Except as required by applicable law, including the securities laws of the United States and the rules
and regulations of the Securities and Exchange Commission (the SEC), we explicitly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise to reflect
actual results or changes in factors or assumptions affecting such forward-looking statements. You are advised, however, to consult any further disclosure we make in our reports filed with the SEC.

Overview

Our
Business

We are a leading global business process outsourcing (BPO) service provider specializing in customer
relationship management (CRM), including sales, customer care and technical support, for Fortune 1000 companies. Our clients include leading computing/hardware, telecommunications/service providers, software/networking,
entertainment/media, retail, travel, healthcare and financial services companies. Our service programs are delivered through a set of standardized best practices and sophisticated technologies by a highly skilled multilingual workforce with the
ability to support 35 languages across 50 locations in 22 countries. We continue to expand our global presence and service offerings to increase revenue, improve operational efficiencies and drive brand loyalty for our clients.



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We generate revenue based primarily on the amount of time our agents devote to a
clients program. Revenue is recognized as services are provided. The majority of our revenue is from multi-year contracts and we expect that trend to continue. However, we do provide certain client programs on a short-term basis.

Our industry is highly competitive. We compete primarily with the in-house business processing operations of our current and potential
clients. We also compete with other third-party BPO providers. Our industry is labor-intensive and the majority of our operating costs relate to wages, employee benefits and employment taxes.

We periodically review our capacity utilization and projected demand for future capacity. In conjunction with these reviews, we may
decide to consolidate or close under-performing service centers, including those impacted by the loss of client programs, in order to maintain or improve targeted utilization and margins.

This Managements Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our
consolidated financial statements and notes thereto which appear elsewhere in this Quarterly Report on Form 10-Q.

Critical Accounting
Policies

Use of Estimates

The preparation of the consolidated condensed financial statements in conformity with accounting principles generally accepted in the U.S. (GAAP) requires management to make estimates and
assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On
an on-going basis, we evaluate our estimates including those related to derivatives and hedging activities, income taxes including the valuation allowance for deferred tax assets, valuation of long-lived assets, self-insurance reserves, litigation
and restructuring liabilities, and allowance for doubtful accounts. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about
the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.

Equipment and Fixtures

Equipment and fixtures are recorded at cost and
depreciated using the straight-line method over the estimated useful lives of the assets. Furniture and fixtures are generally depreciated over a five-year life, software over a three- to five-year life and equipment generally over a three- to
five-year life. Leasehold improvements are depreciated over the shorter of their estimated useful life or the remaining term of the associated lease. Assets held under capital leases are recorded at the lower of the net present value of the minimum
lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease and
is recorded in depreciation and amortization expense. Repair and maintenance costs are expensed as incurred.

The carrying
value of equipment and fixtures to be held and used is evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with authoritative guidance. An asset is considered to
be impaired when the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition does not exceed its carrying amount. The amount of the impairment loss, if any, is measured as the amount by
which the carrying value of the asset exceeds its estimated fair value, which is generally determined based on appraisals or sales prices of comparable assets. Occasionally, we redeploy equipment and fixtures from underutilized centers to other
locations to improve capacity utilization. We estimate the fair value of our asset retirement obligations, if any, associated with the retirement of tangible long-lived assets such as property and equipment when the long-lived asset is acquired,
constructed, developed or through normal operations.

Goodwill and Other Intangible Assets

In accordance with the authoritative guidance, goodwill is reviewed for impairment annually and on an interim basis if events or changes
in circumstances between annual tests indicate that an asset might be impaired. Impairment occurs when the carrying amount of goodwill exceeds its estimated fair value. The impairment, if any, is measured based on the estimated fair value of the
reporting unit. We operate in one reporting unit, which is the basis for impairment testing of all goodwill.

Intangible
assets with a finite life are recorded at cost and amortized using their projected cash flows over their estimated useful life. Client lists and relationships are amortized over periods up to ten years, market adjustments related to facility leases
are amortized over the term of the respective lease and developed software is amortized over five years. Brands and trademarks are not amortized as their life is indefinite. In accordance with the authoritative guidance, indefinite lived intangible
assets are reviewed for impairment annually and on an interim basis if events or changes in circumstances between annual tests indicate that an asset might be impaired.



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The carrying value of finite-lived intangibles is evaluated for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with the authoritative guidance. An asset is considered to be impaired when the sum of the undiscounted future net cash flows expected to result from
the use of the asset and its eventual disposition does not exceed its carrying amount. The amount of the impairment loss, if any, is measured as the amount by which the carrying value of the asset exceeds its estimated fair value, which is generally
determined based on appraisals or sales prices of comparable assets.

Stock-Based Compensation

For share-based payments, the fair value of each grant under our stock-based compensation plan for employees and directors, including both
the time-based grants and the performance-based grants, is estimated on the date of grant using the Black-Scholes-Merton option valuation model. Stock compensation expense is recognized on a straight-line basis over the vesting term, net of an
estimated future forfeiture rate.

Income Taxes

We recognize income taxes in accordance with the authoritative guidance, which requires recognition of deferred assets and liabilities for
the future income tax consequence of transactions that have been included in the consolidated financial statements or tax returns. Under this method deferred tax assets and liabilities are determined based on the difference between the carrying
amounts of assets and liabilities for financial reporting purposes, and the amounts used for income tax, using the enacted tax rates for the year in which the differences are expected to reverse. We provide valuation allowances against deferred tax
assets whenever we believe it is more likely than not, based on available evidence, that the deferred tax asset will not be realized. Further we provide for the accounting for uncertainty in income taxes recognized in financial statements and the
impact of a tax position in the financial statements if that position is more likely than not of being sustained by the taxing authority.

Contingencies

We consider the likelihood of various loss contingencies,
including non-income tax and legal contingencies arising in the ordinary course of business, and our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued in accordance with the
authoritative guidance, when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to determine whether such accruals should be adjusted.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (FASB) issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The
guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement
hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuances, and settlements of the assets and liabilities measured using significant
unobservable inputs (Level 3 fair value measurements). The guidance became effective for us with the reporting period beginning January 1, 2010, except for the requirement to separately disclose purchases, sales, issuances and settlements of
recurring Level 3 fair value measurements which became effective January 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on our financial statements.

On September 23, 2009, the FASB ratified Emerging Issues Task Force (EITF) Issue 08-1 and EITF Issue 09-3, resulting in the issuance
of accounting standard updates ASU 2009-13 and ASU 2009-14. We adopted the new accounting standards January 1, 2011. Under the new guidance, when vendor specific objective evidence or third party evidence for multi-element deliverables in an
arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how
the application of the relative selling price method affects the timing and amount of revenue recognition. The adoption of the new accounting standards resulted in no change to our revenue recognition.

Results of Operations

Three months ended March 31, 2011 compared with three months ended March 31, 2010

Revenue. Revenues increased $16.1 million, or 8.2%, to $212.7 million for the three months ended March 31, 2011, compared to
$196.6 million for the three months ended March 31, 2010. The increase is primarily attributable to new business won in 2010 as well as higher volumes from existing customers.



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Revenues for services performed in our United States and Canadian service centers increased
$9.9 million, or 13.2%, for the three months ended March 31, 2011, compared to the three months ended March 31, 2010. Revenues for services performed in European service centers increased $5.4 million, or 14.2%, for the three months ended
March 31, 2011, compared to the three months ended March 31, 2010. This increase is attributable to the addition of customers. Revenues for services performed in offshore service centers in the Philippines, India, El Salvador, Costa Rica,
the Dominican Republic, Tunisia and Egypt increased $0.8 million, or 0.9%, for the three months ended March 31, 2011, compared to the three months ended March 31, 2010. Revenues in our offshore service centers represented 39.4% of
consolidated revenues for the three months ended March 31, 2011, compared to 42.2% in the same period in 2010.

Direct
Cost of Revenue. Direct cost of revenue (exclusive of depreciation and amortization) increased $9.4 million, or 8.3%, to $122.0 million for the three months ended March 31, 2011, compared to $112.6 million for the three months ended
March 31, 2010. The increase is primarily attributable to the payroll-related cost to service higher revenue.

Gross
Profit. Gross profit increased $6.7 million, or 8.0%, to $90.7 million for the three months ended March 31, 2011 from $84.0 million for the three months ended March 31, 2010. Gross profit as a percentage of revenue was consistent at
42.7% in both the three months ended March 31, 2011 and 2010.

Operating Expenses. Operating expenses decreased
$3.3 million, or 3.8%, to $83.3 million for the three months ended March 31, 2011, compared to $86.6 million for the three months ended March 31, 2010. Selling, general and administrative expense grew from $68.6 million for the three
months ended March 31, 2010 to $68.8 million, or 0.3%, for the three months ended March 31, 2011. Severance, restructuring and other charges, net were a benefit of $0.1 million and a charge of $1.6 million for the three months ended
March 31, 2011 and 2010, respectively. The benefit in 2011 relates to the reversal of previously recorded lease exit costs of $0.9 million partially offset by severance costs of $0.5 million. The charge in 2010 relates to non-agent severance,
lease exit costs, and facility impairment charges. Depreciation and amortization decreased $1.8 million per the scheduled step down of amortization expense and certain fixed assets becoming fully depreciated. Operating expenses as a percentage of
revenues decreased to 39.1% for the three months ended March 31, 2011 compared to 44.1% for the three months ended March 31, 2010, primarily as a result of the decreases in depreciation and amortization and the benefit recorded in
Severance, restructuring and other charges, net.

On April 28, 2011, we commenced a reduction in our workforce of
approximately 140 non-agent positions and we expect to incur approximately $3 million of severance related costs.

Other
Expenses, Net. Other expenses, net increased $2.4 million, or 39.3%, to $8.5 million for the three months ended March 31, 2011, compared to $6.1 million for the three months ended March 31, 2010. We have a foreign exchange hedging
program. Foreign currency loss (gain) consists of realized and unrealized gains and losses on forward currency contracts where we elect not to apply hedge accounting and the revaluation of certain assets and liabilities denominated in foreign
currency. For the three months ended March 31, 2011, we recorded $1.2 million versus a gain of $1.5 million for the comparable period in the prior year. The majority of the losses in 2011 relate to the effect of currency changes on our
intercompany balances. The majority of our gains in 2010 related to unrealized gains on hedging activity in the Philippine Peso in connection with forward currency contracts that were acquired with our acquisition of EGS in 2009.

Provision for Income Taxes. Income taxes decreased $0.7 million, or 41.1%, to $1.1 million for the three months ended
March 31, 2011, compared to $1.8 million for the three months ended March 31, 2010. The decrease was primarily due to redemption of a tax refund of $0.9 million from a foreign jurisdiction relating to a prior year tax matter. Foreign tax
expense comprised of $0.9 million and $1.9 million for the three months ended March 31, 2011 and 2010, respectively. In the United States, where we operated at a loss for tax purposes, we recorded $0.2 million of income tax expense for the
three months ended March 31, 2011. We operate in a number of countries outside the United States that are generally taxed at lower statutory rates than the United States and also benefit from tax holidays.

Liquidity and Capital Resources

Our primary liquidity needs are for financing working capital associated with the expenses we incur in performing services under our client contracts and capital expenditures for the opening of new
service centers, including the purchase of computers and related equipment. We have in place a credit facility that consists of a revolving line of credit that allows us to manage our cash flows. Our ability to make payments on the credit facility,
to replace our indebtedness if desired, and to fund working capital and planned capital expenditures will depend on our ability to generate cash in the future. We have secured our working capital facility through our accounts receivable and
therefore, our ability to continue servicing debt is dependent upon the timely collection of those receivables.

We made
capital expenditures of $6.2 million, including those pursuant to capital leases, in the three months ended March 31, 2011, as compared to $3.9 million for the three months ended March 31, 2010. We expect to continue to make capital
expenditures to build new service centers, meet new contract requirements and maintain and upgrade our technology.



On October 1, 2009, we issued $200 million aggregate principal amount of 11.25% Senior Secured Notes due 2014 (the
Notes). The Notes were issued pursuant to the indenture among us, the Note Guarantors, and Wells Fargo, as trustee. The Notes were issued by us at an initial offering price of 95.454% of the principal amount. The Indenture
contains restrictions on our ability to incur additional secured indebtedness under certain circumstances. The Notes mature on October 1, 2014. The Notes bear interest at a rate of 11.25% per annum. Interest on the Notes is
computed on the basis of a 360-day year composed of twelve 30-day months and is



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payable semi-annually on April 1 and October 1 of each year, beginning on April 1, 2010. The obligations under the Notes are fully and unconditionally guaranteed, jointly and
severally, by the Note Guarantors and will be so guaranteed by any future domestic subsidiaries of ours, subject to certain exceptions. The Notes and the Note Guarantors guarantees of the Notes are secured by senior liens on our and
the Guarantors Primary Notes Collateral and by junior liens on our and the Guarantors Primary ABL Collateral (each as defined in the Indenture).

On October 1, 2009, we, Stream Holdings Corporation, Stream International, Inc., Stream New York, Inc., Stream Global Solutions-US, Inc., Stream Global Solutions-AZ, Inc. and Stream International
Europe B.V. (collectively, the U.S. Borrowers), and SGS Netherland Investment Corporation B.V., Stream International Service Europe B.V., and Stream International Canada Inc., (collectively, the Foreign Borrowers and together
with the U.S. Borrowers, the Borrowers) entered into the Credit Agreement, with Wells Fargo Foothill, LLC, as agent and co-arranger, Goldman Sachs Lending Partners LLC, as co-arranger, and each of the lenders party thereto, as lenders,
providing for the Revolving Line of Credit of up to $100.0 million, including a $20.0 million sub-limit for letters of credit, in each case, with certain further sub-limits for certain Foreign Borrowers. The Revolving Line of Credit has a term of
four years at an interest rate of either Wells Fargos base rate plus 375 basis points or LIBOR plus 400 basis points, at our discretion. The Revolving Line of Credit has a fixed charge coverage ratio financial covenant that is operative when
our availability under the facility is less than $20.0 million. At March 31, 2011, we had $83.5 million available under the Revolving Line of Credit. We were in compliance with the financial covenants as of March 31, 2011.

Letters of Credit. We have certain standby letters of credit for the benefit of landlords of certain sites in the United States
and Canada. As of March 31, 2011, we had approximately $6.5 million of these letters of credit in place under our Revolving Line of Credit. The obligations under the letters of credit decline annually as the underlying obligations are
satisfied.

Unrestricted cash and cash equivalents totaled $24.6 million for the three months ended March 31, 2011 which
is a $3.3 million increase compared to $21.3 million for the three months ended March 31, 2010. Working capital increased $0.4 million to $111.6 million for the three months ended March 31, 2011, compared to $111.2 million for the three
months ended March 31, 2010.

Net cash provided by operating activities totaled $26.8 million for the three months ended
March 31, 2011, a $9.5 million increase from the $17.3 million provided in the three months ended March 31, 2010. The increase is primarily due to the $8.4 million reduction in net loss comparing March 31, 2011 to March 31, 2010.

Net cash used in investing activities totaled $5.1 million for the three months ended March 31, 2011 which is a $2.3
million increase from the $2.8 million provided by the period ended March 31, 2010.

Net cash used in financing
activities totaled $17.0 million for the three months ended March 31, 2011, a $9.5 million increase from the $7.5 million of cash used in financing activities for the period ended March 31, 2010. The change was primarily due to
repayment of debt.

Our foreign exchange forward contracts require the exchange of foreign currencies for U.S. Dollars or vice
versa, and generally mature in one to 18 months. We had outstanding foreign exchange forward contracts with aggregate notional amounts of $227.1 million as of March 31, 2011 and $154.6 million as of March 31, 2010.

We believe that our cash generated from operations, existing cash and cash equivalents, and available credit will be sufficient to meet
expected operating and capital expenditures for the next 12 months.

Off-Balance Sheet Arrangements

With the exception of operating leases discussed above, we do not have any off-balance sheet arrangements.

Seasonality

We are
exposed to seasonality in our revenues because of the nature of certain consumer-based clients. We may experience approximately 10% increased volume associated with the peak processing needs in the fourth quarter coinciding with the holiday period
and a somewhat seasonal overflow into the first quarter of the following calendar year.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

We are exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in
market rates and prices. Our risk management strategy includes the use of derivative instruments to reduce the effects on our operating results and cash flows from fluctuations caused by volatility in currency exchange and interest rates. In using
derivative financial instruments to hedge exposures to changes in exchange rates, we exposes ourselves to counterparty credit risk.



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Interest Rate Risk

We are exposed to interest rate risk primarily through our debt facilities since some of those instruments, including capital leases, bear interest at variable rates. At March 31, 2011, we had
outstanding borrowings under variable rate debt agreements that totaled approximately $12.4 million. A hypothetical 1% increase in the interest rate would have increased interest expense by approximately $0.1 million and would have decreased annual
cash flow by a comparable amount. The carrying amount of our variable rate borrowings reflects fair value due to their short-term and variable interest rate features.

We had no outstanding interest rate derivatives covering interest rate exposure at March 31, 2011.

Foreign Currency Exchange Rate Risk

We serve many of our U.S.-based
clients using our service centers in Canada, India, the Dominican Republic, El Salvador, Egypt, the Philippines, Nicaragua and Costa Rica. Although the contracts with these clients are typically priced in U.S. dollars, a substantial portion of the
costs incurred to render services under these contracts are denominated in the local currency of the country in which the contracts are serviced which creates foreign exchange exposure. We serve most of our EMEA-based clients using our service
centers in the Netherlands, the United Kingdom, Italy, Ireland, Spain, Sweden, France, Germany, Poland, Denmark, Bulgaria, Egypt, Tunisia and South Africa. We typically bill our EMEA-based clients in EUROS or British Pound Sterling. While a
substantial portion of the costs incurred to render services under these contracts are denominated in EUROS, a part is also denominated in the local currency in which the contracts are serviced which creates foreign exchange exposure.

The expenses from these foreign operations create exposure to changes in exchange rates between the local currencies and the contractual
currencies  primarily the U.S. dollar and the EURO. As a result, we may experience foreign currency gains and losses, which may positively or negatively affect our results of operations attributed to these subsidiaries. The majority of this
exposure is related to work performed from call centers in Canada, India and the Philippines.

In order to manage the risk of
these foreign currencies from strengthening against the currency used for billing, which thereby decreases the economic benefit of performing work in these countries, we may hedge a portion, although not 100%, of these foreign currency exposures.
While our hedging strategy may protect us from adverse changes in foreign currency rates in the short term, an overall strengthening of the foreign currencies would adversely impact margins over the long term.

The following summarizes the relative (weakening)/strengthening of the U.S. Dollar against the local currency during the years
presented:



|                                    |  |                             |      |    |      |  |      |   
|----------------------------------- |  | --------------------------- | ---- | -- | ---- |  | ---- | --
|                                    |  | Three Months EndedMarch 31, |     
|                                    |  | 2011                        |      |    | 2010 | 
|U.S. Dollar vs. Canadian Dollar     |  |                             | (2.8 | %) |      |  | (3.0 | %)
|U.S. Dollar vs. EURO                |  |                             | (5.7 | %) |      |  | 6.4  | % 
|U.S. Dollar vs. Indian Rupee        |  |                             | 0.4  | %  |      |  | (4.0 | %)
|U.S. Dollar vs. Philippine Peso     |  |                             | (1.3 | %) |      |  | (2.9 | %)
|U.S. Dollar vs. S. African Rand     |  |                             | 2.8  | %  |      |  | (0.1 | %)
|U.S. Dollar vs. U.K. Pound Sterling |  |                             | (3.6 | %) |      |  | 6.6  | % 

Cash Flow Hedging Program

Substantially all of our subsidiaries use the respective local currency as their functional currency because they pay
labor and operating costs in those local currencies. Certain of our subsidiaries in the Philippines use the U.S. dollar as their functional currency while paying their labor and operating cost in local currency. Conversely, revenue for most of our
foreign subsidiaries is derived principally from client contracts that are invoiced and collected in U.S. dollars and other non-local currencies. To mitigate against the risk of principally a weaker U.S. dollar, we purchase forward contracts to
acquire the local currency of the foreign subsidiary at a fixed exchange rate at specific dates in the future. We have designated and account for certain of these derivative instruments as cash flow hedges where applicable, as defined by the
authoritative guidance.



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Given the significance of our foreign operations and the potential volatility of the certain
of these currencies versus the U.S. dollar, we use forward purchases of Philippine peso, Canadian dollars, Euros, South African Rand and Indian rupees to minimize the impact of currency fluctuations. As of March 31, 2011, we had entered into
forward contracts with financial institutions to acquire the following currencies:



|                   |  |                |           |  |                |   |         |              |  |  |             |  |  |  |       | 
|------------------ |  | -------------- | --------- |  | -------------- | - | ------- | ------------ |  |  | ----------- |  |  |  | ----- | 
|Currency           |  | Notional Value |           |  | USD Equivalent |   |         | Highest Rate |  |  | Lowest Rate | 
|Philippine Peso    |  |                | 3,795,500 |  |                | $ | 109,417 |              |  |  | 48.52       |  |  |  | 43.27 | 
|Canadian Dollar    |  |                | 70,900    |  |                | $ | 72,935  |              |  |  | 1.04        |  |  |  | 0.97  | 
|Indian Rupee       |  |                | 1,062,500 |  |                | $ | 23,494  |              |  |  | 47.48       |  |  |  | 44.47 | 
|Euro               |  |                | 12,100    |  |                | $ | 17,174  |              |  |  | 1.41        |  |  |  | 1.41  | 
|South African Rand |  |                | 28,000    |  |                | $ | 4,110   |              |  |  | 7.06        |  |  |  | 7.06  | 

While we have
implemented certain strategies to mitigate risks related to the impact of fluctuations in currency exchange rates, we cannot ensure that we will not recognize gains or losses from international transactions, as this risk is part of transacting
business in an international environment. Not every exposure is or can be hedged and, where hedges are put in place based on expected foreign exchange exposure, they are based on forecasts for which actual results may differ from the original
estimate. Failure to successfully hedge or anticipate currency risks properly could affect our consolidated operating results.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

(a)Disclosure Controls and Procedures

Our Chief Executive Officer, Kathryn V. Marinello, and our Chief
Financial Officer, Dennis Lacey (our principal executive officer and principal financial officer, respectively), have concluded that our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) were effective as
of March 31, 2011 to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commissions rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by Stream in such reports is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that
any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the
controls and procedures. On an on-going basis, we review and document our disclosure controls and procedures and our internal control over financial reporting and we may from time to time make changes aimed at enhancing their effectiveness and to
ensure that our systems evolve with our business.

(b)Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and Rule 15d-15(f) of the
Exchange Act) occurred during the fiscal quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART IIOTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

We
have been named as a third-party defendant in a putative class action captioned Kambiz Batmanghelich, on behalf of himself and all others similarly situated and on behalf of the general public, v. Sirius XM Radio, Inc., filed in the Los Angeles
County Superior Court on November 10, 2009, and removed to the United States District Court for the Central District of California. The Plaintiff alleges that Sirius XM Radio, Inc. recorded telephone conversations between Plaintiff and members
of the proposed class of Sirius customers, on the one hand, and Sirius and its employees, on the other, without the Plaintiffs and class members consent in violation of Californias telephone recording laws. The Plaintiff also
alleges negligence and violation of the common law right of privacy, and seeks injunctive relief. We believe that we have meritorious defenses and we intend to vigorously defend against these claims. On December 21, 2009, Sirius XM Radio, Inc.
filed a Third-Party Complaint in the action against us seeking indemnification for any defense costs and damages that result from the putative class action. On March 25, 2010, the Plaintiff filed an amended complaint that added us as a
defendant. In March 2011, the court granted preliminary approval of a settlement proposal, conditionally certified the settlement class, and approved the form of class notice. Final approval of the settlement must still be granted by the court,
following the process set forth in the courts preliminary approval order.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

We operate
in a rapidly changing environment that involves a number of risks, some of which are beyond our control. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A. Risk
Factors in our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on March 2, 2011, which could have a material effect on our business, results of operations, financial condition and/or liquidity and
that could cause operating results to vary significantly from period to period. As of March 31, 2011, there have been no material changes to the risk factors disclosed in our most recent Annual Report on Form 10-K for the year ended
December 31, 2010, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Additional risks and uncertainties not currently known to us or that we currently deem to
be immaterial also may materially adversely affect our business, financial condition or operating results.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

Issuer Purchases of Equity Securities

During the first quarter of 2011,
our Compensation Committee approved the payment of applicable tax withholding on the vesting of restricted stock and restricted stock units held by certain members of our senior management team through the surrender by such shareholders and the
repurchase by us of that number of the vested shares or units equal to the total tax withholding obligations divided by the fair market value of our common stock on the trading day preceding the vesting date. Such repurchases by us were not made
pursuant to a publicly announced repurchase program. The aggregate number of shares repurchased by us from such executives is set forth in the table below.



|                                       |  |                                         |       |  |                                |   |      |                                                                                 |  |  |                                                                           |  |  |  |   | 
|-------------------------------------- |  | --------------------------------------- | ----- |  | ------------------------------ | - | ---- | ------------------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------- |  |  |  | - | 
|Period                                 |  | (a)Total Number ofShares/UnitsPurchased |       |  | (b)Average PricePaid per Share |   |      | (c)Total Number 
ofSharesPurchased asPart of PubliclyAnnounced Plansor Programs |  |  | (d)MaximumNumber
ofShares thatmay yet bePurchased underthe Plan orProgram | 
|January 2011                           |  |                                         |       |  |                                |   |      |                                                                                 |  |  |                                                                           |  |  |  |   | 
|(January 1, 2011  January 31, 2011)   |  |                                         | 3,595 |  |                                | $ | 3.90 |                                                                                 |  |  |                                                                          |  |  |  |  | 
|February 2011                          |  |                                         |       |  |                                |   |      |                                                                                 |  |  |                                                                           |  |  |  |   | 
|(February 1, 2011  February 28, 2011) |  |                                         |      |  |                                |   |     |                                                                                 |  |  |                                                                          |  |  |  |  | 
|March 2011                             |  |                                         |       |  |                                |   |      |                                                                                 |  |  |                                                                           |  |  |  |   | 
|(March 1, 2011  March 31, 2011)       |  |                                         |      |  |                                |   |     |                                                                                 |  |  |                                                                          |  |  |  |  | 
|                                       |  |                                         |       |  |                                |   |      |                                                                                 |  |  |                                                                           |  |  |  |   | 
|Total                                  |  |                                         | 3,595 |  |                                |   |      |                                                                                 |  |  |                                                                          |  |  |  |  | 





|ITEM 5. | OTHER INFORMATION
|------- | -----------------

On
April 28, 2011, we commenced a reduction in our workforce of approximately 140 non-agent employees in order to improve our responsiveness to our clients and their customers, as well as our own employees, by eliminating excess layers primarily
focused on the top four management levels of our company. We estimate that we will record charges related to these reductions of approximately $3 million, which primarily reflect costs associated with one-time termination benefits. We expect that
the majority of these costs will be paid out in the second quarter of 2011 and that substantially all costs will be paid out over the next twelve months.



|ITEM 6. | EXHIBITS.
|------- | ---------

We are filing
as part of this Report the Exhibits listed in the Exhibit Index following the signature page to this Report.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.



|            |  |                              |  |                                                                                                               
|----------- |  | ---------------------------- |  | --------------------------------------------------------------------------------------------------------------
|            |  | STREAM GLOBAL SERVICES, INC.
|            |  |                             
|May 4, 2011 |  | By:                          |  | /s/    Kathryn V.
Marinello                                                                                   
|            |  |                              |  | Kathryn V. Marinello Chairman, Chief Executive Officer and President (Principal Executive
Officer)            
|            |  |                             
|May 4, 2011 |  | By:                          |  | /s/    Dennis
Lacey                                                                                           
|            |  |                              |  | Dennis Lacey Executive Vice President and Chief Financial Officer (Principal Financial
and Accounting Officer)



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Exhibit Index



|            |  |                                                                                                                                                                                                                                                                                                                              
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                  
|            | 
|10.1*       |  | 2011 Management Incentive Plan (MIP)  Corporate SG&A for Managers and Above effective January 1, 2011. (Portions of this exhibit have been omitted pursuant to our request
for confidential treatment. We have filed omitted portions separately with the SEC.).                                                            
|            | 
|10.2        |  | Employment Agreement, dated as of January 13, 2011, by and between Brian Delaney and Stream Global Services, Inc. (filed as Exhibit 10.1 to the Registrants Current Report
on Form 8-K, as filed with the Securities and Exchange Commission on January 14, 2011 (File No. 001-33739) and incorporated herein by reference).
|            | 
|10.3        |  | Separation Agreement, dated as of March 8, 2011, by and between Sheila M. Flaherty and Stream Global Services, Inc. (filed as Exhibit 10.1 to the Registrants Current
Report on Form 8-K, as filed with the Securities and Exchange Commission on March 14, 2011 (File No. 001-33739) and incorporated herein by reference).
|            | 
|31.1*       |  | Principal Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                         
|            | 
|31.2*       |  | Principal Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                         
|            | 
|32.1**      |  | Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                          
|            | 
|32.2**      |  | Principal Financial and Accounting Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                           



|* | Filed herewith.
|- | ---------------

|** | Furnished herewith.
|-- | -------------------



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