JoAnne Feeney (FTN Midwest): Are you seeing any evidence of double booking going into the fourth quarter?
Bob Rivet: Not at all. The indications from the current quarter were a lot of sellthrough, particularly in the distribution channel. We''re at a very low level of weeks of inventory and the signals we continue to get from OEMs is very bullish and strong that units are moving quickly.
JoAnne Feeney (FTN Midwest): On the graphics side, do you are you getting more traction in the mainstream, and do you think you can break in at the high-end enthusiast segment?
Dirk Meyer: We feel good about the graphics business, based on good OEM design win momentum, a lot of which turns into business late this year and much of it next year. A lot of the business that we did was in the channel where the response has been strong. Based on the upcoming release of the RV 670, we are bullish about being able to participate in a bigger and more profitable piece of the business.
Tim Luke (Lehman Brothers): How do you see you inventory levels developing going forward?
Bob Rivet: It is hard to imagine with the seasonal strength of the fourth quarter that inventories won''t decline. Inventories should drain in the fourth quarter.
Doug Freedman (Am Tech Research): Can you explain the charges related to severance and asset impairment?
Bob Rivet: We have had a multiple-prong attack to address integration issues, integration opportunities where we had redundancy in different categories where we needed to eliminate those resources. In addition, we had to step up and deal with people who were not doing as well as we thought they should.
The asset impairment of $42 million reflects the value of the Spansion stock which has been more permanently impaired since it has been sitting around $8 for a long period of time, which was more than our current book value when we wrote it down to the appropriate level and took the non-cash charge in the quarter.
Doug Freedman (Am Tech Research): What''s your outlook as far as the overall pricing environment?
Dirk Meyer: We did not see a qualitative change in the environment and we are not expecting much of a change either going forward.
John Pitzer (Credit Suisse): On the top line guidance for the fourth quarter, why the confidence around normal seasonal?
Hector Ruiz: The demand for products from all of the regions around the world, particularly in the emerging markets, is very strong. Our customers are telling us that they also have a concern on three areas, places where plastic appears to be in shortage, places where they see displays being difficult to obtain and the fact that the major fire in Japan where the battery factory got put out of business.
John Pitzer (Credit Suisse): With Penron coming out in mid-November, how will that impact Barcelona adoption and volume ramps?
Dirk Meyer: Based on the input we are getting from our customers and end users, there is a lot of demand for Barcelona. Going from two cores to four cores is a big incremental increase in capability in the Opteron line that is going to provide some benefit to the business.
Uche Orji (UBS): How much confidence do you have going forward that the level of performance is sustainable and not just pent up demand for the products that you launched?
Dirk Meyer: It is hard to really make confident proclamations on GPU share fluctuations, just because of the way the add-in board business works as an ecosystem. A lot of our view of the forward-looking potential in the business comes from the design win activity that we generate with our OEMs. That''s a leading signal as to how competitive our products will be when they come out.
Uche Orji (UBS): On graphics, in terms of RV 670, what kind of early feel are you getting from the customer base for this product?
Dirk Meyer: Customers are going to love it.
Srini Pajjuri (Merrill Lynch): As you have achieved more efficiencies, do you expect to put that money back on to your balance sheet?
Bob Rivet: Correct. Instead of just building inventory, we would like to build inventory and turn around and sell it. We will take the advantages we see from manufacturing and let that flow through the business whether it is the balance sheet or the P&L.
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