Good afternoon everyone. Welcometo NIKE's Fiscal 2008 Second Quarter Conference Call. For those of you who needto reference today's press release you will find it at www.nikebiz.com, leadingtoday's call will be Pamela Catlett, Vice President, Investor Relations. Before I turn the call over toMs. Catlett, let me remind you that participants of this call will makeforward-looking statement based on current expectations and those statementsare subject to certain risks and uncertainties that could cause actual resultsto differ materially. These risks and uncertainties are detailed in the reportsfiled with the SEC including Forms 8-K, 10-K and 10-Q. Some forward-lookingstatements concern futures orders that are not necessarily indicative ofchanges in total revenues for subsequent periods due to the mix of futures andat once orders, exchange rate fluctuations, order cancellations and discounts,which may vary significantly from quarter to quarter. In addition, it is important toremember a significant portion of NIKE Incorporated's business includingequipment, most of NIKE Retail, NIKE Golf, Converse, Cole Haan, NIKE BauerHockey, Hurley and Exeter Brands Group are not included in these futuresnumbers. Finally, participants may discussnon-GAAP financial measures. A presentation of comparable GAAP measures andquantitative reconciliations can also be found at NIKE's website. This callmight also include discussion of non-public financial and statisticalinformation, which is also publicly available on that site, www.nikebiz.com. Now I'd like to turn the callover to Pam Catlett, Vice President, Investor Relations.

Thank you. Happy holidayseveryone and thank you for joining us today to discuss NIKE’s fiscal 2008second quarter results. We issued our results about an hour ago. If you need toreference them as the operator said you can find the results on our pressrelease on our website at nikebiz.com, where you'll also find reconciliationsbetween GAAP and non-GAAP reported items. Joining us on today's call willbe NIKE Inc.'s CEO, Mark Parker followed by Charlie Denson, President of the NIKEbrand and finally you'll hear from our Chief Financial Officer, Don Blair whowill give you an in depth review of our financial results. Following theirprepared remarks we'll take your questions. As for questions, you all knowthe drill. We'd like to allow as many of you to ask questions as possible inour allotted time. So we would appreciate you limiting your initial questionsto two. And in the event you have additional questions that are not covered byothers please feel free to re-queue and we will do our best to come back toyou. Thanks for your co-operation on this, and it is now my pleasure tointroduce NIKE Inc.'s CEO, Mark Parker.

Thanks, Pam, and welcome, everybody,to our second quarter call. Q2 was another strong quarter for NIKE and showsthat we continue to meet the promise of delivering sustainable profitablegrowth. We increased revenue and gross margins in every region. Net revenue forthe quarter was up 14%, that's 25 consecutive quarters of year-over-yearrevenue growth. In the quarter we added over $500million of incremental revenue to reach $4.3 billion. Global futures are up 10%on a constant dollar basis. EPS grew 11% for the quarter to $0.71 a share. Wecontinue to manage down our inventory levels, our footwear business continuesto build strength in every region, and we increased our quarterly cash dividendto $0.23 per share, a 24% increase over the previous quarter and that's consistentwith our five year average of dividend increases. These numbers really illustratethe ability of the NIKE brand to connect with consumers. Q2 also shows thebenefit of having multiple levers to pull; across categories, geographies andthroughout the portfolio. This gives NIKE a lot of flexibility, especially inshifting macroeconomic conditions. This flexibility has helped NIKE consistentlyoutperform our competitors. And that's a good indicator for some people, but wedon't focus in the past, we focus on our potential. Specifically we are building someserious momentum is emerging markets, China continues to be a big focus;revenues grew 37% in Q2. We have a solid and strategic presence in tier-1 andtier-2 cities. We're seeing very solid year-over-year comps sales performanceacross our retail base in China.For example our flagship store in Beijingis exceeding our expectations and is now one of the most productive andexciting stores in the world. We are on plan in Chinaand looking forward to showcasing NIKE innovations on the world stage in Beijing this August. Another big story is our CEMEAregion, which includes Central and Eastern Europe, the Middle East and Africa. Revenues for the…

Thank you, Mark. Happy holidaysto everybody. Well, what can I say? Second quarter for the NIKE brand was verygood. Revenues are up, futures are up, margins are up and the quality of ourinventory and close-out levels is excellent. All-in-all we feel pretty goodabout today's results and about where we are in our growth plans. I would like to start off todayby talking a little bit about our plans with retail and that is to buildworld-class destinations that deliver premium experience to the consumer. Weare doing that with our partners and in our direct retail locations, were weare seeing some very encouraging numbers. Mark mentioned the House of Hoopswhich had a terrific opening and the running experience and NIKETown New York. I think theseare good examples of how we are elevating the consumer experience of retailwith superior merchandising, great service at the floor level, and a strongconnection back to the local community. We are seeing very strong resultsin converting some of our women stores to do gender presentation and we areapplying several of these new elements in our new NIKE store format. We are well along in thedevelopment phase of the new store and we would expect to see the firstlocations announced in the next 90 days. NIKEiD is gaining a lot of steam aswell. We opened NIKEiD Studios in both New Yorkand London,NIKETowns over the past couple of months. In fact, reservations for asession with the NIKEiD design consultant are already booked clear throughJanuary. And the conversion rate for the NIKEiD studio and NIKETown New York alone is up toover 90%. As part of our growth plan wesaid that digital was going to be a growth driver and it is. More than threemillion people visit our website each month. And that continues to grow.Increased traffic combined with very healthy conversion…

Hey, thanks, Charlie. Thestrength of our global business portfolio was again evident in our secondquarter financial performance. Both revenues and earnings per share grew at adouble-digit rate, driven by strong operating results across multiple brands,geographies and categories. In addition, we continue to deliver both growth andincreased capital efficiency, as both return on invested capital and cash flowgrew strongly versus the prior year. To recap the results for NIKEInc., revenues for the quarter grew 14%, with 4 points of growth from theweaker dollar. On a reported basis, NIKE brand revenues grew 13%, as all fourregions and all three product types delivered revenue growth for the quarter.Revenues for the businesses we report as other is 16%. Futures order scheduledfor delivery from December, 2007 through April, 2008 grew over 13% versus lastyear, driven by robust growth in each of our international regions. Excludingcurrency changes, futures were up 10%. For the quarter, pre-tax incomegrew 15%. Diluted earnings per share for the quarter grew 11% to $0.71,reflecting a higher tax rate than last year's second quarter, which was reducedby the recognition of a new international tax agreement. Second quarter gross marginsexpanded 90 basis points versus the prior year, driven by better in-linepricing margins in footwear, better closeout management and faster revenuegrowth in high margin businesses. Currency changes had a minimalimpact on gross margins for the quarter. Over the past two quarters of fiscal2008, we delivered $738 million of free cash flow from operations, paid out a$185 million in dividends and repurchased $614 million of NIKE stock. Even soour balance of cash and short-term investments totaled over $3 billion as ofNovember 30th, over $6 a share on a gross basis and nearly $5 a share net ofdebt. Our trialing 12 months return oninvested capital was 23.5% up 240 basis points verses the end of the secondquarter…

Thank you. (Operator Instructions) Our first question comes from the line of Jeff Edelman withUBS.

Happy holidays and nice work!

Hi, Jeff.

Hi, Jeff

Charlie, question for you on domestic footwear, if we try todelve into it a little more. If we think about the retail component, thatprobably maybe added about 2.5 point of your US sales increase. So, we saw yoursales to your customers up just a little faster than futures. If that's thecase then we really didn't have that much of the shift in timing of shipmentsto account for the slower rate of growth in the futures. So, my question is: isthere anything else in there? Or: am I looking at it the wrong way?

Well, you mean: with respect to looking at futures versusthe revenue number?

Yes. Because the larger part of your revenue growth clearlywas driven by your own retail stores. So, I think, you are backing out, maybesales to other customers were up 4.5% versus the 3% futures.

So, Jeff, without getting into the details of all the math,as you point out, there are a couple of things that are driving the differencesbetween the futures growth and the revenue growth as they have historically.Our own retail is definitely additive to the business. As we talked about, weare growing our retail business in the mid teens. So, that's helping. We arealso seeing faster growth in some of the at-once businesses, including thingslike auto replenishment. The thing that we do caution people on here though isthat, as we've seen with our USrevenue numbers in the last few quarters, there is some volatility on timingsacross quarters. And so, generally what we are saying is: we think this is amid single-digit growing market for us. We think that's the underlying businesstrend and that's what we would expect to see for this fiscal year.

Okay, great. That's what I thought. And then just a followup on apparel: could you give us some sense of how much of the apparel businessin the USis really positioned really where you want it? And: how much of it is stillwork-in-process? Could you just give us some rough idea there?

Yeah, Jeff, this is Charlie. I think Mark and I both madecomment to a couple of different things. One would be that the performance sideof the business is really starting to pick up momentum and we are very pleasedwith the progress we are making, both using NIKE Pro as an example, the SportEssentials and our placement in the authentic performance oriented retail channels.So, we feel really good about that. I think one other things that we feel isstill a big opportunity for us is getting the sportswear or the sports cultureside of the business a little better positioned. We've spend quite a bit oftime working on that over the last year as we moved into the categoryorientation from an organizational standpoint, and you will see a launch of anew position for the brand around sportswear in apparel and footwear late nextsummer, early fall.

Okay. Thank you.

Our next question comes from the line of Brian McGough withMorgan Stanley. Please proceed with your question.

Hi, guys.

Hi Brain.

Hi, Brian

I guess, Mark, first, I mean: there has been a lot ofstrategic change at the company over the past six months, you had sale ofStarter, you had the Bauer announcement, acquiring Umbro. It seems like theportfolio is getting a lot more focused as it relates to growth in higher ROIbusinesses. And, I guess I am wondering: are the divestitures done? Or: couldwe see anymore that on earning an acceptable ROI right now? And then also just,when you look at the consumer trends out there: are there any areas where yousee the consumer right now that you don't currently touch with the NIKE brands,but where you're thinking acquisition can help?

Okay. There are some good big questions there. First of all,I would just say that we are making some bold or more aggressive moves with theoverall portfolio than you might have seen in recent years. And, really, it'sall designed to optimize and leverage our overall potential as the company. Andit's not just about performance now it's about potential as well. So that isreally driving how we are evolving our portfolio and the sales of Starter brandand then Bauer, the acquisition of Umbro. And then, of course, as we've talkedabout before, the focus we have on the bigger growth opportunities within theremaining brands in the portfolio is really where we're focused on, onoptimizing our growth potential. I would say right now specifically to your question that wedon't see any other specific divestitures on the horizon with current NIKE Inc.portfolio. We feel good about the performance of the other brands in theportfolio as evidenced by the Q2 performances led by Converse and as I saidCole Haan. But we also feel good about Hurley, NIKE Golf, and then certainlythe Jordanbrand and then of course the NIKE brand, all performing well, but this isreally all driven by our fixation and trying to optimize the overallperformances of the portfolio. I will say: to-date, this year we are going to intensify ourfocus on being a better NIKE Inc. and that is looking at better leveragingopportunities, investments and competencies across the portfolio. So it's notjust about divesting and acquiring, it's about actually leveraging better whatwe have. And we have significant assets and competencies to leverage better, Ithink, over the overall portfolio. So, you'll see a lot more of that in thecoming years for us. So, I really think that we're just starting to become, whatI would call: “a better NIKE Inc.” So I think we have really grabbed the reinson the Nike Inc. portfolio and you are seeing the results of that type offocus. In terms of consumer trends back to year, I don't see anyradical shift in consumer trends these days that are dramatically affecting ourstrategy. I think the intensified focus on categories is being critical. And,frankly, I sit here today a year after we really started to increase the focuson the categories within the NIKE brand and see more opportunity for growththan ever have before. It's really become crystal clear that we have lots of roomfor growth and that focus on the categories in that connection with theconsumers actually helping tremendously.

If you see another brand that comes along that you want tobuy Mark: do you think you could handle two acquisitions at once, i.e., Umbroand another one?

Well, that's not in the plans right now. I do feel likewe've got a lot to take advantage of right now, with the Umbro acquisitionassuming that goes through, as we do lots of upside opportunity there, and youknow very well all the opportunity we are focused on within the other existingbrands in the portfolio. That said there is opportunity I think beyond whatexists today for NIKE Inc. from the acquisition standpoint. I am not going tospeculate today as what those are specifically. But we do see acquisitionopportunities going forward. I don't think you are going to see anything in thenear future in terms of other acquisitions though.

Okay.

But it would be foolish frankly not to investigateproactively other opportunities to diversify the portfolio and we will continueto do that.

And if I could just sneak in one more time sorry. To youCharlie, unfortunately you get a bit more of a negative question. But on the U.S.business, I mean: you had a great quarter. But when you look out, I mean:you've got retail square footage out there which is still growing prettyquickly, not yours but the overall industries, probably about twice the rate itshould. And I am wondering: just what your overall level of comfort with thestate of the U.S.market? Not even right now, but: where you think it's headed over the next yearor two? Do you think that we need to see another like big round of storeclosures at retail? What are your like: “big picture thoughts” on that?

Yeah, I think, well, I mean: the U.S. market from an economystandpoint is a little bit of headwind. I mean: I don't think that's any secretwith the raising energy costs and some of the other things that we talk abouton a macro standpoint. But when you think about over the next couple of years,I think, we have learned some valuable lessons maybe back in the late 90s andwhen this industry here specifically domestically went through a pretty radicalconsolidation and was a little bit over billed. I think we are starting to evolve now, before we hit thattime period and I think some of the things that we are talking about and wetalk about this internally quite a bit is where does the US market head and howdo we continue to grow and I think, this evolution into a more categoryspecific set as destinations, enables us to get into a new and quite frankly amore positive growth mode for the industry, here in United States. So, I think we are in the early days of that shift in thattransition. It's going to take some time, but I think I will use this analogyall the time when I am talking both internally and to our retail partners that25 years ago everybody thought, athletic footwear was part of the familyfootwear portfolio. And somebody -- there was a couple of people that had thevision that it could turn into an entire industry, and I think today if youthink of the basketball consumer, or the running consumer, or even thetraining, or the team athlete consumer. Those are all opportunities to continueto grow businesses that exist today and when you start to look at it that way,that's become a little bit more exponential.

Great! Happy holidays guys.

Thank you.

Thank you, Brian.

Our next question comes from the line of John Shanley withSusquehanna. John Shanley –Susquehanna: Thank you and good evening folks.

Hi, John.

Hi, John.

Charlie with the US futures up 1% versus the 7% of growth infutures in the year ago period: are we likely to see a continued growth inat-once business, that may change your whole way of looking at futures as aindication in our models of how we anticipate NIKE sales results in thisdomestic market particular?

No I don't think so John. I think when we look at the USbusiness right now. The weakness is really on the apparel side of the business.So, I don’t think it's really going to dramatically change any of the way weare operating currently. We continue to use the future's program as a greatindicator, but certainly not without the specific or exact barometer and it's agreat planning tool for both us and the retail community and it allows us toproduce the right amount of product to put them in a marketplace and continueto manage the marketplace and the inventory levels, so that everybody is in agood place.

Can you give us a rough idea of how much of the business isfuture driven versus at-once in the footwear category in particular?

I don't have specific numbers, but it’s still primarily afutures driven formula for us and we see it continuing certainly in the nearterm and we would hope in the long-term. As long as we can continue to createthe demand for the brand and sell into demand, which has always been ourapproach and the formula that we have run here. We have to maintain adiscipline at managing the marketplace and making sure that we do keep thatdemand curve in the right place. But we don't see any big changes, significantchanges.

That's good to hear. Also in the domestic footwear side ofthe business: can you give us an insight in terms of what retail channelsreally help drive that strong 12% gain that the company was able to generate inthe second quarter? And: are there other channels that you are looking at thatcould help maybe down the road to help you sustain topline growth in spite ofthe overwhelming market share position that NIKE enjoys in the US footwearmarket?

Yeah, I am delighted to be able to report again thatactually out of our top 10 accounts we were up with nine out of ten accountsand that's across the board in all channels and so we had a great quarter inthe US.We are very, very pleased with the performance across all of the channels and sowe are not, we don't feel compelled to look outside the current channels thatwe are operating in. We think that we can continue evolve those channels.Specifically into some of this category destination work that we talk sospecifically about and feel pretty good about the distribution network, that wehave and the availability of the NIKE brand both at price points and even ashigh as to the level of the collector. So, we feel pretty good about thedistribution and the strategies you have got in place.

And one more point that may just help clarify a little bittoo in terms of understanding that futures numbers. Is that we are still seeingpretty good growth on the footwear side as Charlie indicated, the weak spot forus in the US has been a piece of the apparel business. The performance apparelhas done really well, the top end of our sportswear line has done well. It'sreally been that sport inspired part of the business that's been a little morechallenging.

The sports inspired piece of the sportswear business.

Correct for apparel

I assume the growth in the performance under the business hasbeen: is it on plan or above plan from what you initially anticipated?

I would say we are on or slightly above plan.

That's great to hear. Thank you very much.

Thanks John.

Our next question comes from the line of Bob Drbul withLehman Brothers.

Hi happy holidays.

Hi Bob.

Hi Bob.

I guess the first question that I have is related to the US alittle bit. Can you talk about the US inventory position as it relatesto total NIKE both, on your books? And: what you think about it as retail? Andthen within the US business: can you just talk a little bit about the trend oforders in that 1% futures numbers like first half of the period, second half ofthe period?

I laugh at you Bob.

I will take the second one.

Okay you take the second one first.

That's only one question actually.

Yeah, well may be more useful to think about it for overallNIKE Inc. The futures number is actually slightly weighted towards the thirdquarter. So, the growth is little faster in the third and the fourth, but not ahuge amount.

And as far as the inventory levels both out at retail and inour system are good. Again, we feel very good and very confident about where weare. The USteam here is really, I think, learned and done a nice job at managing inventoryactually over the last four or five years and certainly over the last three.And so, I think they continue to get more and more scientific and specific downto the every even, the very specific door level and we feel still very good andvery confident. Our outlet business is good. The outlet business overall inthe USis a little bit of a struggle and we would mire some of that, but we feel verygood about the performance of the outlet business. And the investments thatwe've made in the supply chain over the last four or five years are certainlypaying dividends even as we speak today. So, I would say that inventory levelsstill are very, very comfortable here in the US.

And then my second question, Pam, would be: can you justgive us some of your mindset as you look to the Olympics? And, you talked aboutthe additional dollars you are going to spend in the fourth quarter headinginto it, but: how we should think about the dollar investment on theadvertising and marketing plans around the Olympics in total?

Yeah, Beijingis going to be the biggest single sporting event probably in years in mylifetime and certainly is a great opportunity for next brand. So, it's a bigevent, a big opportunity, and we will be rising to the occasion, shall we say. That being said, also the European Championships are veryimportant and as I look at our soccer business right now, the second half ofnumber coming out of the categories, specifically soccer, are extremely strongand we feel very, very good about our ability to continue to grow that businesson a global basis and the focal point of that will be in Europe.So, between those two events, we're pretty bullish and we're going to be prettyaggressive.

Great! Thank you very much.

Thank you

Our next question comes from the line of Virginia Genereux withMerrill Lynch.

Thank you. Maybe for Don, if you could just talk a littlebit sort of longer term about the respected impact on gross margin of kind ofmaybe the currency benefit and any input cost pressures you might be seeingheading into the next year. I mean, one thing I am asking: can we look back tosort of fiscal '04, '05? Is that indicative of the currency help, the currencybenefit you might see this time, you might see on the go forward? I know somehave said that we are not able to hold on to as much as that, because retailersare doing a lot of their own direct sourcing and they know the math on thatnow. But: you guys might have more ability to keep that?

Well, first of all Virginia I don't think this is an easyquestion to answer, because you know there is a lot of moving parts in grossmargin, it has to do with the mix of products by category, geography. There islots of input costs, our supply chains are lot more efficient than they werefour years ago. So, I think where we start the conversation really is that weread a lot of the macro-elements. We manage the levers that we can control andare goal is to keep margins moving ahead and grow those margins over time. Thatdoesn't mean any one quarter necessarily, but that's the long-term strategy. I think what you are seeing right now for this year and thisquarter is that we're definitely getting some benefit for selling currencieslike the strength of the Euro. As you know we hedge anywhere from 12 to 18months in advance of the transaction date, so we're going to see that benefitcome into our numbers over this fiscal year and next. We are definitely seeing pressure from Asian currencyappreciation the Thai Baht, the Renminbi. But, at the same time those are themacro factors. The things that we are working on Lean manufacturing, wecontinue to get benefits from that. We get benefits from a tighter supplychain. We've got lower air freight numbers this year and that we've taken somesurgical price increases. So, the nature of the equation is: what we are trying to dois manage our financial model. And I know the reference you are talking aboutas to: how you handle FX gains? And: what gets passed back to retailers andconsumers and so on? We try to do that on very surgical basis. We look at modelby model pricing. We look at trading terms of all of our accounts and what weare trying to do is make the right decision in the circumstances. So, I can'tgeneralize to tell exactly what it will look like.

Yeah. I'll just jump in here too and say that, I think weare better prepared than ever before really to manage the margin side of ourbusiness between the inventory management tools we have with the supply chaininvestments we've made. Just more discipline around that. Completely expandingthe Lean manufacturing and realizing the benefits of that across footwear andnow into apparel, materials consolidation efforts, the SKU management, SKU andstyle management. Don said surgical price increases, and then leveraging thatall across the portfolio. So, it's really frankly feels not completely, notarrogant about this, but frankly a lot more confident in our ability to managethe margins going forward even with some challenges.

That's great. So I know it's hard to ask on the big callhere. But it sounds like: even if input costs, Don and Mark might get more,might exert more pressure sort of six months out conceivably, that you guysfeel continued confidence in your ability to drive the gross margin up in a materialin a faction to deliver margin expansion, total operating margin expansion.

Yeah, I mean, I think, your last phrase there was theoperative phrase which is we manage the whole P&L and the balance sheet. Sowe are trying to do here is work all the levers and operating margin expansionis the plan and that's what we need to do to achieve our operating model.

Right. And then Don, sort of, follow on to that. It soundslike: I just want to make sure I understood your commentary about SG&A,about rate of SG&A. You said: SG&A, with demand creation, was probablygoing to be up ahead of revenue? Should it grow, if SG&A was up sort of 17%this quarter? Is it going to be double digits February and more than that may?I am asking, you said it was, sort of: more second, more sort of fourth quarterloaded I think?

Yeah, I definitely would expect to see more growth in thefourth quarter than in the third. That's what I had said earlier, and it'sreally driven demand creation investments around Beijing and Euro Champs.

Okay. It probably grows double-digit even in Feb?

I wouldn't want get into given guidance of that level.

All Right. Happy hols, everybody!

Thanks Virginia.

Our next question comes from the line of Omar Saad withCredit Suisse.

Thanks. Good evening.

Hi, Omar.

I wanted to ask couple of questions. One kind of biggerpicture question for Mark entirely, and then may be a little bit more oftechnical question, financial question for Don. Mark as you think about the relevance of this brandglobally. I mean: this is the brand, talking about the NIKE brand. It's a brandeverybody knows pretty much everywhere. How do you think strategically aboutyour marketing plan for next year and long term? Do you feel like you aregetting to a point where this has really transformed into a consumer brand? Or:perhaps you can be a little bit more strategic, or focused, or picky aboutwhere you spend your demand creation dollars? Or: do you think long term youstill kind of going to be pursuing the same sort of marketing spend, marketingapproach?

Well, yeah, I mean: the brand is obviously the most valuablething we own, and it doesn't show up on the balance sheet. But what we aredoing as we laid out last February is trying to reorganize the company alongthe lines of the categories to really deepen the focus and the connection wehave on specific consumers. And, as I said a little earlier, I have never been as moreoptimistic I should say the ability to turn the insights we get from that butits deeper connections into really relevant product and communications, verybullish on the potential of the NIKE brand to grow as broad as we are aroundthe world. I think we are getting deeper and more specific within each of thepieces of our business. And I think the category alignment is really showing us howmuch more we can grow in those pieces of the business. But thechallenge/opportunity is: actually knowing what leverage the pool wear aroundthe world to optimize that potential. The other thing I would add is that we continue to look atthe broader portfolio and looking at those leverage to pool. So, we are notputting all the pressure to grow on the NIKE brand itself. But again, I havenever been as bullish on the potentials of the NIKE brand. Now that we'veactually “dialed down” more tightly from a customer standpoint throughcategories. And again you'll see that come alive in I think even higherlevels of innovation, edgy or more relevant communications and consumerexperiences at retail and so on and so forth. But, we really feel very goodabout where we are and the move we are making to make ourselves even morecompetitive.

Yeah, and Omar I would just add one thing to Mark's commentsaround this consumer experience piece. Because I believe on longer-term, theconsumer and brand loyalty is going to be built on the foundation of arelationship. And I think that customer experience piece is going to becomemore and more important. And I think some of the things that we've talked over thelast couple of years and we've introduced the Nike+, which is that digitalcommunity, that virtual community, that consumers are participating in or someof the things we've learnt around our Joga.com experience. Those are going tobe as important. And when we talk about marketing in the future, I think thatwill encompass a lot of those types of things as well.

Is it a possibility that you could pull back on some of themore traditional areas of marketing and re-focus some of those dollars to putit in some of those new areas?

It's not only a possibility, it's a current reality. We areactually shifting some dollars out of, may be more conventional mediums indemand creation and marketing traditional TV advertising for example, andshifting to more surgical and frankly more relevant areas of communications andconnecting points to consumers. And that would include retail as well. In ourindustry, I think we really need to lead the transformation of the industry toa venue that is or venues that are much relevant to consumers from anexperiential standpoint. So, we're seeing that happen right now.

Yeah. That migration is in already pretty much full speed.

Understood, understood thank you. And then Don: can I askyou a quick question on the financials?

Okay, but then we are going to have to pick up the pace,because we are getting to our time and we want to get a couple of more people.

Understood, thank you Pam. Corporate expenses, it looks theyare up, if you look at the segment model, the segment P&L looks like theyare up significantly year-over-year. I think $335 million versus $232 millionlast year. Can you talk about what’s driving that?

Yeah there is a whole variety of different things that landat the corporate center, but some of them that we are investing in would beretail infrastructure, some of the category go-to-market processes and just howwe developed product and innovation. So, just really how we classify thenumbers.

Understood, thank you.

Thank you, Omar.

Our next question comes from the line of Brad Cragen withGoldman Sachs. Please proceed with your question.

Yes well and thank you. And thanks for the insight into thebreakdown on Chinabetween comp growth and door growth. Can you just lend some perspective interms of: where you are in terms of the door opportunity in China? And: how many you areopening at the run rate right now?

Well, the run rate continues it's flattening out at aboutthe rate that we've been on over the last year and half which is in the 500 to600 door range per year. We feel confident around that number. It hasn't shownany signs of slowing down as we start to really get into the tier-2 cities.Most of our time and efforts have been spent around the big three over thefirst couple of years and we're in some of the tier-2 cities, but now we'vereally started to expand there and I would see that level maintaining itselfdefinitely through the Olympics.

Okay. And then on the One Star launch with Target: can youjust put in perspective how you're segmenting the Converse distribution? And:how that strategy is different from what you were doing with [start ups]?

Well, first of all we are working with Targets, which is anaccount retail partner that we highly value. I am very happy with therelationship with Target. One Star is essentially a sub-brand of Converse asopposed to the Converse brand proper. So there is an exclusive relationshipwith the One Star brand in apparel and in footwear with Target here in the United States.And I would just say that we're very bullish on the relationship, feel like weare really ready to come out at the gates here and really two phases the firstpart of January and then fully in the first part of February. The product line which I've seen is incredibly strong interms of I think the design and also the value for the price. Target is -- runsa very strong and disciplined operation and obviously has some marketingstrength as well. So they're going to put some real energy behind the One Starbrand and that launch soon here in coming weeks and then we expect that tocontinue to build throughout the year and beyond. So very bullish on therelationship with Target and where we think that will go for Converse or OneStar.

Great, thank you.

Thank you, Brad. We have time for one last questionnaire. Iapologize to anyone we've missed but we -- one more person.

Our last question comes from the line of Jim Duffy withThomas Weisel.

Thank you, nice job and happy holidays.

Thank you Jim

Just a couple of quick ones. I want to be sure I am clear onthe gross margin guidance. Don when you talk about the rate of increaseconsistent with what it was in the first half of the year: do you mean on ayear-over-year basis?

Yes.

Okay and then final point of clarification: what was thedemand creation number for the quarter?

$557 million.

Very good, thanks very much, have a great Christmas.

Thank you.

Thank you Jim and thanks every one for joining us. We lookforward to speaking again soon. Happy holidays.

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