Q.  Michael, you have talked a lot over the last year-and-a half about dual objectives of growth and profitability.  It certainly sounds like from your commentary on this call that the bias is certainly, over the last quarter, was towards profitability.  I think you mentioned that that would continue to be the case.  Am I hearing that right?

A.  You heard it right.

Q.  Should we be thinking about the same balance going forward as we saw in the quarter between those two?

A.  Given the choice between profits and growth, we are going to go for the profits.  Our belief is that with the changes that we are making in our cost structure, we are going to be able to do both of those together.  First priority for us is to retain solid profitability for the company and that is what we demonstrated this quarter, and what we are focused on.

Q.  Brian, you talked about the strong progress in consumer, and also 50 percent of the product mix being cost optimized, yet you set an expectation that operating margins might be lower in the near term 1 -2 versus the 4 percent that you saw this quarter.  Why, given the strong growth rate you are seeing, outgrowing the market, gaining scale on a fixed-cost basis, increased percentage of products that are cost optimized, why do you actually foresee the operating margin taking a step back in the short term?

A.  We are pleased with the progress that the consumer team is making in expanding their footprints in retail and in gaining share overall in consumer, and getting cost out of the business.  One of the things that we are working hard to do is to diversify revenue and margin opportunities in that business.  As you think about the kinds of ways we can do that in the consumer business, some of that is a vendor and partner program for the business.  As you think about how that plays out, it may be that some of that is a little lumpy.  In the third quarter we had a little bit of that showed up in the business and that is just the way the business is going to be going forward.  I think that the thought process around 2 percent is the way to think about it in toll for now.  I think that over a longer period of time, we can see better than that.

Q.  I think you said in your concluding remarks, Brian, that you would reduce headcount in certain areas.  There has also been talk about a hiring freeze at Dell.  Can you comment on whether there is a hiring freeze, and whether there has been decisions taken at this point to reduce headcount further?

A.  I think that with the realities of this environment, those are the kinds of things we are working through.  There is a hiring freeze that we are applying across the business.  It doesn’t mean that we are not selectively hiring where we need to for key roles, but it is clearly one of the levers that we have right now in terms of managing costs in this environment.

Q.  If I think about the hiring freeze, the prediction is, I think about 20 percent of Dell, which would suggest that with the hiring freeze, your headcount would actually go down about 1.5 percent per month.  Am I incorrect in that analysis?

A.  We are not going to confirm our retention rates in the business.

Q.  Listening to the gross margin lines, you guys characterize in the current gross margin levels as above the sustainable level and then attached to that, can you comment on the competitive pricing commissions that you saw during the quarter?

A.  I think that we made nice improvements in gross margins in the quarter.  If you look at historical performance, we are well within the range of what I would consider historical gross margin range.  I think this is a bit of a different time in terms of the market environment and I think that can change from quarter to quarter as we see the dynamics externally change.  In terms of competitive pricing dynamics, I think it is a competitive business and continues to be excellent capacity and I think you will continue to see competitive dynamics around pricing.  I think there are affects in currency, in fact, that are causing some changing in the way that people are thinking about pricing in certain markets, too.

The reason that you see our operating income up 22 percent and our revenues down is that we did not participate in some business which was diluted to the company.

Q.  Going back to the consumer side of the equation, can you give us an update on your retail points of presence and how does the current economic environment impact your plans to scale off the retail footprint over the next couple of quarters?

A.  We now have our products available at over 20 thousand retail outlets around the world, made continued progress in expanding that.  I think that rate at which you will probably see us to continue to expand is the footprint.  We will keep doing that even in this environment.

Q.  Michael, can you give us an update on your views of the notebook market and how aggressive Dell plans to be in this phase?

A.  We were diving into that in a big way.  We have products there.  It appears to us that this is mostly a complimentary product category.  Certainly in the emerging countries, it looks like is incremental and a kind of new business.  We were also the first with a product with 3G and that has allowed us to do pretty well with a bunch of the carriers.  We are putting a number of those agreements in place right now.

Q.  I just want to ask some questions about cash flow and earnings.  We predicted cash flow trailing 12 month and about 83 cents in free cash flow and in some of the quarters you were going for growth, and in this quarter you obviously focused on product and used cash.  With growth arguably going slower, and you may even have to pay some severance, how does cash get better from here?  You say when it gets in the balance, but can we expect cash to be better that the 83 cents in the trailing 12 months or does it continue to get worse from here before it gets better?

A.  I think, first off, we will see a return to a typical relationship between shipments-production and procurement.  It is a matter of matching up and driving more linear production at procurement that is tied to the demand profile.  I think that is a matter of a onetime adjustment.  I think that you will see that come back in the next couple of quarters.  I think that is how we would think about that.  In addition to that, we are driving a lot of initiatives around working capital.  We have implemented a working capital counsel that is striving key processes and should ultimately result in an improvement in our cash conversion cycle back to historical sorts of levels, which we would expect something closer the negative 30 days in the short-term.  So I think that is the dynamic we see.  We don’t expect it to get any worse.  Those are our main drivers.

Q.  So with regards to earnings, you would view the 83 cents as an artificially depressed level?  Usually earnings gravitates the free cash flow, etc.  Given that we may be at more charges coming and bad debts need to go higher, etc.  Do you see them converging or do you view the cash more as a onetime lumpiness with regard to the slow down and growth rate?

A.  That is our view.  It is really a onetime impact.

Q.  From what you can tell us of what you can see, can you make a comment on the revenue line that obviously dropped about a billion quarter to quarter, but obviously had great profitability with that.  Do you think that this new level of demand should hold through the next three months?

A.  I think it is going to have a lot to do with the overall market environment.  We are focused on what we can control.  We are invested in controlling costs in this environment and we are focused on profitability in the market that we see out there.  There are spots within the market that we do see growth in places where we have gained share, even in the third quarter.  We will be selective in picking those spots and really no guidance on the overall revenue

Q.  After being about three weeks into it, has it stabilized or is it still continuing to deteriorate for you?

A.  I would just say that we expect a relatively challenging environment to continue and we are not going to characterize today what we see in the fourth quarter demand.

Q.  You still have a ton of cash in the balance.  You have $4 per share.  Do you think you will start to resume a more aggressive share buyback program soon?

A.  We do believe that the current prices are actually very attractive, but at the same time we are carefully watching liquidity in this environment.  We will balance those two things going forward and not really make any commitments around what we are going to do right now.

Q.  On the operating expenses, Brian, I wasn’t sure how to read your comments when you said that there were some bonuses that positively impacted.  Will opex stay about these levels into this current quarter?

A.  There was an adjustment in the crude bonus for the company just driven by what we see in the performance of the company so we will continue to drive dollars out of the opex line.  It is difficult to predict in terms of the revenue levels, where we are going to end up with specific opex percentage, but I think you will continue to see costs coming out of opex.

Q.  If I just look at the January quarter, I know you want to comment on revenues, but what will the effects be sequentially for you?

A.  We have a very comprehensive patching program in the company and I would say that the third quarter generally had no impact on the PNL.  It was pretty negligible.  I expect, given our edging positions to be well protected for the fourth quarter as well.

Q.  Curve rates are on the top line, not on the bottom line?

A.  In the third quarter we had probably 3 points of help on the revenue line and we just don’t know where the dollar is going to be in terms of the fourth quarter.

Q.  If we can dig a little more into the gross margin at 18 which is obviously strong.  Can you characterize product mix versus some of the other changes, components, etc. that you saw during the quarter so we can get an idea of the magnitude of improvement?

A.  It sort of depends by region.  As you look at the product mix dynamics, on a global basis, clearly had nice progress in some of the higher margin products.  Component pricing was slightly higher that our traditional deflation that we would see on a pricing given the demand dynamics.  That is about as much as we will share.

Q.  If you could talk just a little bit about changes in Europe which you obviously started last quarter, but through this quarter you said you are focusing more on being able to recognize revenue from services contracts.  Can you give us more detail on how you have been able to turn Europe around?

A.  I think that opex was up 150 basis points and was driven by very good opex management in Europe and well as gross margin improvement in the quarter.  We were more effective in our pricing and selectivity and deals that we participated in.  Obviously the component pricing helped.  Nothing changed in the way that we count for services as we talked about at the end of the second quarter.  That is really not much of an impact.  Services did well in the quarter and then improved, but no significant impact from that.

Q.  What percentage of your cash is overseas versus domestic at this point?

A.  We have talked about it before.  It is the majority of our cash.

Q.  I want to touch more on the direct model.  You really seem to be adding an incremental glow here or monster to your common fund with direct model and constraints in this type of environment.  Were you seeing in the quarter, or toward the back half of the quarter, folks taking on an enterprise to be part of your business coming to you and saying, “We want to spend our budget before we lose our part of the margin benefit?”

A.  No.

Q.  As far as the retail piece, was there any change or structural change in inventory pricing protection or marketing dollars that you are providing in this quarter versus prior?

A.  No.

Q.  Can you give us a little more color in terms of what Dell is incurring in the blades server market?  We are taking that your two way and four way services have been well received.  Can you talk about who you are taking share from, if you are taking share?

A.  We are actually growing in blades.  Blades are pretty concentrated business.  There are really one and half competitors there.  We have done some pretty interesting things.  We have blade to have a 50% memory footprint than our competition.  We use about 20 percent less power comparing our blades to our competitors.  It has been a nice area of growth.  We also introduced four socked AMD blade and first with a Shanghai processor.  It is a pretty good position.

Q.  Are you seeing any incidents of add on as far as services related to the blade?

A.  Blades are associated with large transactions which include deployment services, virtualization services, ecologic storage, and WMC storage.  Really integrated programs that are a lot stickier for us and getting us much more into the kind of solution that we are really targeting.

Q.  As far as use of the cash, I heard the comment about share buyback, yes/no, being careful in this type of environment, but what about acquisitions in terms of boosting your a la carts or services platform?  You have a pretty ambitious plan there that seems to be pretty compelling but you might need to d a few more apps up there.  Can you take advantage of this prospecting market and go out there and buy some assets?

A.  The answer is we are watching for these opportunities.

Q.  Some of the comments that you made about the consumer profitability, can you give us an idea of your out market targets for the commercial business for the next three quarters?

A.