Thank you for joining this Adaptec Quarter Earning ReleaseConference Call. Today's call is being recorded. For opening remarks, I would like to turn the conferenceover to Nicole Noutsios. Please go ahead.

Thank you, operator. And good afternoon, ladies andgentlemen. During today's call, you will hear from Sundi Sundaresh, Presidentand CEO, followed by Chris O'Meara, Adaptec's Chief Financial Officer. AfterChris's remarks, we will host a brief question-and-answer session. Some of the comments today will include forward-lookingstatements regarding future events and/or projections of the financialperformance of the company based on our current expectations, including ourprojection of operating results for the third quarter of fiscal 2008. These statements are subject to significant risks anduncertainties and cause our actual results to differ materially from thoseexpressed in these forward-looking statements. We refer you to the risk factorssection of the documents that Adaptec has filed with the SEC, specifically ourmost recent Forms 10-K and 10-Q, which contain important risk factors thatcould cause actual results to differ materially from expectations. In addition, some of the financial measures that areincluded in this presentation are non-GAAP. For a reconciliation of GAAP tonon-GAAP measures, please visit our website at www.adaptec.com/investor. With that, I would like to introduce Adaptec's President andCEO, Sundi Sundaresh.

Thank you, Nicole. Good afternoon and thank you for joiningus. During this call, we will be reviewing our latest quarterly resultshighlighting important developments and providing an update on progress we madeon our plans to improve our operating results. We’ll discuss the results of ourmost recent cost reductions efforts and progress and our Data Protection andStorage Solutions businesses. But before jumping into a discussion of our financial andoperating results. Let me say a few words about our recent settlement with oneof our largest investors, Steel Partners. As many of you know, we've been in discussions with Steelover the past several months about ways Steel and the company might worktogether. I am happy to report that the company and Steel have reached anagreement that both parties believe within the best interest of allstockholders. The board has agreed to nominate free steel representativesto join what would be a nine-member board. Steel in turn has agreed to vote forthe combined slate of directors. Again, the board believes this is a goodoutcome for the company and its stockholder and together I expect we willpursue of course designed to maximize value for all our stockholders. Now lets take a look at the specifics of the past quarter.Adaptec revenues for the fiscal second quarter were $44 million. Exceeding ourcompany guidance of $38 million to $42 million. However, I want to emphasis that although the quarter endedstrong and the near-term outlook remain steady this is due to some short-termrevenue upside attributed to IBM and parallel products in the channel. We recorded a non-GAAP loss from continuing operations netof taxes of $2.4 million or $0.02 per share. As a result of our disciplinedapproach to cash management our balance sheet continues to remain strong,during the quarter we added approximately $6 million to our cash position andwe ended the quarter with…

Thank you, Sundi. And welcome everyone. Please note that allfinancial numbers I am discussing, except for revenue will be on a non-GAAPbasis, unless otherwise noted. In summary, our total net revenue of $44 million includes$37.6 million of revenue from our DPS business and $6.4 million from our SSGbusiness. The overall channel mix is approximately 51% from our total revenue. Our top customer, IBM represents 36% of our revenues, whileour two largest distributor Tech Data and Ingram Micro represent at 14% and 10%respectively of our net revenue for the second quarter of fiscal '08. Our gross margin in Q2 was 35%, compared to 33% in Q1 as wecontinue to reduce our component cost. Our total cash and investments improvedby $6 million to $598 million up from $592 million in Q1, primarily as a resultof our refund that we receive from IOS and our effort to maintain positive cashflow from operation. Our non-GAAP EPS was a $0.02 loss per share compared witha $0.05 loss in Q1. Now I would like to provide you with some guidance for thethird quarter of fiscal 2008. We believe potential favorable seasonality bothwith the channel and with our largest OEM customer, IBM will help stabilize ourbusiness despite the continue decline in our parallel SCSI business. As a result, we expect revenue to range from $39 million to$43 million. Non-GAAP EPS is expected to range from a $0.03 to a $0.01 profit. Now, I’ll turn the call back to Sundi to briefly summarizeour comments today.

Thank you, Chris. Going forward, we’ll continue to drive ouroperational efficiencies in the company. OEM on our channel business to takemarket share from competitors and focus on developing new adjacent high growthmarkets in storage that will help to support and scale our business. I am proud of the hard work of our employees and themanagement team, and grateful for the guidance of our board of directors as wework our way through this important period of transformation for Adaptec. I’ll now turn the call over to the operator to begin thequestion-and-answer session.

(Operator Instructions) We will go first to Michael Coadywith B. Riley.

Thanks. Good afternoon. Hi Chris. Hi Sundi. What did youtalked previously about making some more investments in the channel in terms ofsome sales and marketing when you talk now about your restructuring effortsbeing fully utilized in the fourth quarter. Could you give us an indication ofhow much our OpEx could drop on a quarterly basis?

I think we are working at Apex coming down, another couplemillion dollars as we fully realize the savings. The majority will be comingout of the R&D areas we really rationalized our -- have rationalized ourcost structure there. We continue to tune sales and marketing with more focuson our handful of region and more focus on some of our marketing programs aswell.

Okay. And the gross margin of 35% was pretty strong. Wasthere a function of channel mix in the quarter and do you think that issustainable not only in our December quarter but a couple of quarters though?

I am really going to talk with regards for one quarter but Ithink, if you look at the product mix and in fact, we are now getting some ofthe sales we probably would from our out-sourced manufacturing perspective andas well as just continually focus on our cost of sale and I think this is astarting for Q3 is sustainable.

Okay. Thanks. And just last the, a cash flow from operationsfigure if you’d exclude the $49 million benefit?

The $49 million was in the previous year. You are thinkingof the tax adjustment and probably year ago.

I am sorry. So what was the cash flow from operations guys?

Cash flow from operations, we grew cash about $6 million andso cash flow from operations was essentially above $1 million positive, wasabout $5 million from the tax refund.

Got it. Thank you.

(Operator Instruction) At this time, I want to turn theconference back to management for any additional or closing remarks.

Thank you everyone for joining us today. On the recap byfinding you that we have not increased focus on our business, now that we'vegot our agreement with Steel. We've increased our channel share. We arecontinuing to improve our operating results with the focus on profitability andthank you until the next earnings call.

Ladies and gentlemen, this concludes today's conference. Weappreciate your participation and you may disconnect at this time.