This summary is based on the fourth quarter fiscal 2007 earnings call conducted by The Bear Stearns Companies, Inc. (BSC: chart) on December 20, 2007.

Management:

COO and CFO: Sam Molinaro
IR and Corporate Communications: Elizabeth Ventura

Key Investors Issues

- EPS represented a loss of $6.90 a share compared to profit of $4 a share last year.
- Net income was a loss of $854 million compared to profit $563 million in the year-ago period.
- The company reported negative revenue of $379 million versus $2.4 billion a year ago.

Fourth Quarter Highlights

Market conditions continue to be challenging as the global credit prices that begin in July continue to adversely impact global fixed income markets.

The combination of continued weakness in the U.S. housing market and increased levels of mortgage delinquencies, together with investor anxiety over recessionary pressures, rating agencies down rate various structured products and uncertainties with respective assets, led to significant declines in MBS prices and activity.

The company announced it would take a $1.2 billion write-down on mortgage securities inventories, as a result of continuing deterioration in market conditions through the end of October.

During the month of November, market conditions continue to deteriorate, which resulted in additional write-down bring total mortgage related losses to $1.9 billion, or approximately $8.21 per share. This write-down, together with difficult conditions across the credit and interest rate markets, resulted in net revenues turning negative to a loss of $379 million and the company recording its first ever quarterly loss of $6.90.

The $6.90 loss per share compares to net of $4 in the November 2006 quarter. Sequentially, fourth quarter earnings declined from $1.16 per share, earned in the third quarter of fiscal 2007.

Revenues from international activities were adversely impacted by the challenging global fixed income and equity marketing conditions.

Inventory markdowns of mortgage and asset-backed security positions held in both Europe and Asia, served to reduce international net revenue to approximately $84 million, a decline of 84% from $536 million earned in the August quarter. However, despite these results, international revenues reached a record $1.6 billion for fiscal 2007, a 23% increase from $1.3 billion earned in fiscal 2006.

- International headcount increased to over 2,100 people, a 37% increase from 1,500 people a year ago.
- The company announced an agreement in principle to establish comprehensive strategic alliance with CITIC Securities. This alliance will include the establishment of a joint venture in Hong Kong together with the cooperation agreement to assist CITIC in the development of their institutional capital markets activities in China.
- The company announced that it would issue a $1 billion, 40-year convertible trust preferred securities that would convert to approximately 6% of Bear Stearns and that it would acquire a six-year convertible bond and warrants, giving the right to acquire 7% of CITIC.

The company took actions to reduce overall operating costs by reducing headcount and rationalizing businesses in light of the deteriorating market conditions.

Total employee headcount was reduced by approximately 1,400 employees, or 9%, as the company reduced staffing levels across the firm and, in particular, in the mortgage origination and securitization areas. The headcount reduction resulted in non-recurring severance cost of approximately $100 million been recognized during the fourth quarter. The company will continue to monitor market condition and make additional cost reduction as necessary during 2008.

Capital Market net revenues includes institutional equities, fixed income and investment banking, were a loss of $956 million, a decrease from $1.91 billion of net revenues in November 2006 quarter, and a decline from a gain of $1.05 billion earned in the August 2007 quarter.

Institutional Equity net revenues decreased 11% to $384 million when compared to $430 million earned in the November 2006 quarter.

Sequentially, Institutional Equity net revenues decreased 47% from $719 million earned in the August 2007 quarter.

- The domestic and international cash equity sales areas achieved record results associated with increased customer volumes and market share gains.
- Risk arbitrage revenues rebounded strongly from the difficult sequential quarter into more favorable market conditions.
- Principal strategies area experienced record net revenues and increased trading gains in quantitative strategies. Offsetting these increases were reduced net revenues from the structure equity products area, primarily due to volatile market conditions and a $190 million reduction in gain and structured no portfolio when compared to the prior quarter.