Q.  On the debt shelf that you filed, can you talk about the uses of cash, and maybe the timing of why you filed that now?

A.  We have to be prepared in the marketplace in terms of when we might see something that becomes interesting.  For us, it is kind of balancing out our capital structure and we had a shelf out there that had expired.  So this gives us flexibility to see what is happening in the marketplace.  As we balance our global cash, that is just something we have to do.

Q.  Can you just talk about your new product launches in the backdrop of a weakening demand environment?  Of the 24 new consumer products, are you still on track or have you pulled back on some of those new product introductions so that is helping you with your shelf marketing budget?

A.  No, I haven’t really pulled back on any product launches.  We certainly vectored our product development and marketing organizations to things that align closely with customer needs, so that would go right to savings and productivity, virtualization, those technologies that are going to yield immediate savings to customers.

Q.  On the gross margin side, were there any kind of reversals there?  Last quarter there were some deferred services that hurt the gross margins.  Is it kind of safe to presume that the lower consumer operating margin also implies that there is going to be an impact for the gross margins next quarter?

A.  There really were no onetime events that materially impacted the gross margins.

Q.  I am assuming that there are more of the channel marketing costs and things like that.  Is that safe to assume going into the next quarter?  The guidance you gave about consumer operating margins into the next quarter, presumable the consumer side has lower gross markings as well.. I am just wondering if that is a fair statement?

A.  I think that we will continue to grow the consumer business.  I think there is some timing as to when margins are recognized in the quarter that gave us a better result than I think we would expect going forward.  You can expect that to continue to grow probably faster than the rest of the business.

Q.  Can you just go into linearity in this past quarter, how you saw it progressing?  Obviously we saw weakness pretty soon into the quarter.  How did that progress through the rest of the quarter?

A.  We have reasonable year-over-year growth in the month of August and I think that what we saw was really a slower period of growth than in September, then October was aggressively similar to what we saw in September.  That is sort of the dynamic.

Q.  When you think about cost optimizing units, can you tell us the way you are going to use the OEMs and the percent of units that are full systems now that are both, either on the consumer side or on the commercial side, and where to you think that percentage can go to?

A.  In terms of the optimization, we implemented a process called Design to Value, which is focused on rebuilding each of the designs from the ground up, leveraging all the tools, tearing down competitive products, tearing down our products, and ultimately taking costs out of the design process.  We collaborated and worked with OEMs as part of that process as we develop products and you can even apply that process to redesigning existing products.  That will be a process that moves forward.  As we talked about, that can provide up to 30 percent reduction in the product cost as we go through that process.  About a third of our transactional volume today is moving from contract manufacturer.  That will continue to increase.  We are not going to talk about where that ends up, but that is a process that we continue to try.  That is one of the elements that allow us to continue to take cost off.

Q.  When you look to leverage direct partner programs and expand the channel, can you talk about how that impacts costs and impacts the ratio, direct versus indirect, going forward?

A.  If we grow from our direct, then that is more channel business for sure.  The mix of the partner direct business has been pretty favorable so, the operating margins of that business are relatively similar to the commercial direct business because of the mix of servers and storage and advanced products.  We are actively growing that, signing up more partners, and I think you will see that piece of business to continue to grow.

Q.  Your desktop per unit costs can you give us some idea of what that was and what ASP change was here?

A.  I don’t have units, but I have revenue for desktops year-over-year was actually down 14 percent in the computer.

Q.  Do you have any ASP changes in the desktop?

A.  No, we don’t have that.

Q.  For the consumer, is there an upper level of operating margin at which you start prospecting your cost control, cost savings into growth, as opposed to improved margin, or in the long-run, do you want to get operating margin as high as possible?

A.  I think a lot of it depends on how the margin plays out.  There are places in the world today, and certain product lines in our business where our strategy is to more aggressively gain share.  In some cases that is going to dilute margin rates.  That is a selective strategy where we see long term growth opportunities, where we see opportunities to differentiate and in longer term generate improved margins.  It really depends on what the markets will give us, how we play it.  I think that in an environment where we see overall relatively weak demand, we are going to lean harder on the profit and operating side.

Q.  Is there a long-term operating margin for the consumer business?

A.  The guidance that we provided to our consumer that over a window of probably about fiscal year 2010, that is about what we would expect.  Something in the 2 percent operating range.  Beyond that, I think we can expand and improve and be somewhere between the key competitors in that space in terms of their margin rates.

Q.  How are you guys seeing the up sales of the direct business working versus your expectations?  Is this providing any type of boost to gross margins in the near term with services attached?  How is it helping or affecting gross margins?

A.  We continue to do pretty well there.  We chose not to sell a fair amount of product that would have been very diluted to the companies margin and profitability and that, of course shows up in improving our margins in everything that we did sell.

Q.  Any color on your negotiation with ODNs, EMS and other parties in the supply chain on the effective margins?  Are there any benefits there in the current gross margin picture?  How much negotiation room do you have in the current contracts?  Does that help the gross margin?

A.  We are transforming the cost structure of the company with a view towards pretty big savings.  As we make these changes, our total costs should come down to deliver products.  That is why we are doing it, that is what we are seeing.  We do believe we have pretty good leverage in those discussions.

Q.  On the bill of materials, with the gross margin, did you gain more on the component side or with the product designs that really helped you on the product gross margin for the quarter?

A.  As you think about component cost declines, typically the way that that plays out in the market place, is those generally get passed on because everyone generally enjoys similar trends.  We may see that similar given our model, but that is the way we think about that.  Clearly, the product costs are differentiated and allow us to improve the margins as we drop through some of the significant changes in the product cost.

Q.  Those were designed during the quarter?

A.  I am not going to say that.

Q.  Corporate has just reduced its counter ’09 gross forecast from 14 percent to 5 percent.  I would like to know if you think that is reasonable and if you intend to gain share over the coming year?

A.  I don’t really know.  Would we like to gain share?  Sure we would like to gain share.  But, we are more focused on having solid profitability.  I don’t think we really know what the growth of the industry is going to be next year.  We are planning a pretty conservative set of assumptions on the belief that it is easier to dial it up than dial it down.

Q.  Do you think that it is going to be potentially negative PC unit growth?  How would you handicap that?

A.  I don’t hazard to guess on that.

Let’s just review kind of where we are.  So far this year our earnings per share for the company are up 6 percent.  Dell has a great balance sheet.  We have strong customer relationships.  We have a strong brand.  We are expanding the mix of products and services that we have focused on the enterprise.  The execution at Dell is improving.  This is going to allow us to continue to deliver solid profitability.  Our customers are really focused on value right now.  That really plays to Dells core strength.  I think that we really have some opportunities to seize on here that our competitor can’t.  We are clearly choosing profits over gross but we also believe that the changes that we are making to our cost structure will allow us to achieve both over time.