Good morning, ladies and gentlemen, and welcome to PTC's Third Quarter Fiscal Year 2007 Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions]. As a reminder, ladies and gentlemen, this conference is being recorded. I would now like to introduce Meredith Mendola, PTC's Vice President of Corporate Communications. Please go ahead.

Thank you. Good morning everyone, and thank you for joining us today. Participating on the call will be Dick Harrison, our President and Chief Executive Officer, and Neil Moses, our Executive Vice President and Chief Financial Officer. In addition, Jim Heppelmann, our Executive Vice President and Chief Product Officer, and Barry Cohen, Executive Vice President of Strategic Services and Partners, are here to participate in the Q&A. Before we get started, I would like to remind everyone that during the course of the conference call, we will make projections and other forward-looking statements regarding future financial performance, business trends, and other future events. We caution you that such statements are only predictions, and that actual results might differ materially from the results projected in these statements. We refer you to the risks detailed in the Company's 2006 Annual Report and Form 10-K, the Company's 10-Q from the second quarter, and in the Company's other reports filed with the SEC from time to time. A replay will be available until 5:00 PM eastern time Monday, July 30th at 402-344-6812. Additionally this conference call is being webcast, and a replay will be available through our website at ptc.com until Monday, July 30th at 5:00 PM. Also on our Investor website you will find a document with fiscal Q3 2007 financial and operating metrics, which we will discuss on this call. After our prepared remarks, we will hold a Q&A session. In order to keep this moving, please limit yourself to one question and one follow-up. If you have an additional question, you will need to get back in the queue. I will now turn the call over to, Dick.

Thanks, Meredith. Good morning, everyone. Thank you for joining us on our third quarter 2007 earnings call. There are three items that we will discuss with you today. First, I will discuss the revenue shortfall in the quarter and what caused it, next I will discuss how the results from the third quarter color our view of our near term and longer term outlook and opportunity. I will then turn the call over to, Neil, to provide more detailed Q3 metrics and Q4 guidance. Let me take a few minutes to discuss our revenue results from the quarter. As you can see from the metrics in the press release our performance was mixed. We performed well in several areas. We delivered record maintenance revenue of $103 million. This is important as it is a strong indicator of the health and loyalty of our large customer base. We also delivered Enterprise Solutions revenue growth of 18%, which is a continuation of our performance over the last few years, and is significantly higher than industry growth rates. Finally, we delivered significant growth in Europe across all product categories and lines of business. We are disappointed with our performance in other areas. Most of the revenue shortfall was in license revenue. Our Desktop Solutions revenue declined year-over-year, which is counter to our recent trend of strong growth in this line of business. The performance was spread across Pro/ENGINEER new seats, modules, and upgrades, with the most significant change from recent quarters in upgrade and module sales. By geography the revenue weakness was concentrated in North America and Japan. In North America, the third quarter results were a disappointment, given our recent performance which has been very strong. In Japan, our performance has been inconsistent due to market issues and execution issues. This quarter,…

Thank you, Dick, and good morning, everyone. I am going to spend the bulk of my time on issues from the third quarter that require additional color. Our third quarter expenses and the reversal of our valuation allowance against US deferred tax assets. I will then provide our outlook for the fourth quarter and full fiscal year, and then we will open up the call to questions. First, our high level income statement results for the third quarter and first nine months are as follows. Total revenue for the quarter ended June 30, 2007, was $225 million, up 4% from the same period last year. Non-GAAP operating expenses were $196 million, and non-GAAP operating margin was 13% in the third quarter. Our non-GAAP earnings per share was $0.16 which is lower than our original guidance due to the revenue shortfall, as well as the reversal of the valuation allowance. Had we not reversed the valuation allowance this quarter, non-GAAP earnings per share would have been $0.21. For the first nine months of fiscal 2007 we delivered 11% revenue growth, 14% non-GAAP operating margins, and $0.63 in non-GAAP earnings per share, or $0.68 in non-GAAP earnings per share had we not reversed the valuation allowance. This compares with $0.62 in non-GAAP earnings per share for the same period last year. Dick has already discussed the revenue highlights from the third quarter, and our Press Release includes year-over-year growth rates for the third quarter and year-to-date results. Additionally you can access more revenue metrics on our Investor Relations website at PTC.Com. Therefore, I will bypass my typical commentary on revenue metrics for the quarter and move on to our spending. Third quarter non-GAAP operating expenses were $196 million. This is significantly lower than our original guidance implied, and was helped by lower…

Thanks, Neil. I think we are ready for questions. One question, one follow-up, and then we'll move on to the next person. Question and Answer

[Operator Instructions] The first question is from Woo Jin Ho, CIBC World Markets, your line is open.

Thanks. Dick, you have indicated in the prepared remarks that the Pro/E upgrades and the module revenues were significantly below expectations in the quarter this had been a source of incremental Pro/E revenue since last June. Given the results and the outlook do you think that this particular portion of the Pro/E business has run its course?

Well, I am not sure if I understand the question. You mean the growth that we had the last four quarters or six quarters? Are you asking if that it has run its course?

No, I am specifically speaking about the Pro/E upgrades and modules business.

I actually don't think it has run its course. I think there were just some timing issues on some larger deals that didn't really come in. I mean there is seasonality with respect to contract renewals with our installed base customers, and larger deployments of the product development system itself. So I don't think that it has run its course.

Okay. And Neil, it seems that the revenue per employee, the quarterly run rate for revenue per employee has been declining since December of '06. Now, the cost actions being implemented in the fourth quarter, were they planned regardless of the Q3 shortfall, and have you expanded those cost actions as a result of the reduced outlook?

So two questions. First of all, I don't view revenue per employee as a very relevant metric for PTC, because as we globalize our workforce, that metric really becomes a less relevant way to evaluate the Company's performance, so that is the first comment I would have. Secondly, with respect to the actions that took place in the fourth quarter, we had this globalization initiative ongoing anyway, and we were expecting to take action with respect to that globalization initiative in the fourth quarter. We did accelerate some of the actions that we plan to take in response to what we saw happen in the third quarter, that is true, but generally speaking, we were headed down this path anyway.

Thank you.

So let me just add a little more color to that. What we have been trying to balance here for the last couple of years is since back in '03, so from '04 onward, we have been trying to reaccelerate the growth in the business which we have done, and also get our operating margins up into the minimum 20% range. And even above that I think really sort of first class companies have, so we have been sort of in this balance about investing to grow, and at the same time, growing the operating margins. It is a double challenge, so we did about two years ago, Jim Heppelmann's group in R&D basically increased by 15% their capacity, in terms of headcount, and at the same time reduced by 15% their costs, so we had sort of a proxy for doing that in other functions across the Company, and sort of had been building a plan to do that. We have accelerated the plan and we are going to carry it out now and into next year, so I think there is an opportunity to both continue to grow, and actually not so much disinvest but invest by going offshore, not only in R&D now, but in other functions in the Company.

I think maybe just to expand on that one step further if I could, it is not just a cost reduction activity, it is increasing PTC's presence in emerging markets, which are very important to our future growth. So for example, we are going to expand our presence in China as you would anticipate, where we have significant presence already, and our leading market share position in the industry, and we will probably also expand our presence in our infrastructure in emerging markets, such as India and Eastern Europe as well.

So the good news for us, I think, is that we have done it for the last couple years. We have today offshore, for example, in the R&D, 60% of R&D is offshore, so we know how to go offshore. We have physical locations where we are offshore. As Neil, implied we are going to expand and increase a big one in China, that will compliment our 700 to 800 people that we have in India today, and we are just going to execute the same kind of tasks that we did in R&D across the other functions of the Company.

Okay, next question, please?

Next question is from Mr. Jon Maietta, Needham & Company. Jonathan Maietta - Needham & Company: First question, I had was Dick, you had mentioned in your prepared remarks that the some of the deals that had slipped in Q4, or Q3 you expect to close in Q4. Did any of the deals that slipped get lost to the competitors?

No. There were three or four pretty large deals that we actually thought we had. All of them were in the sort of final process of getting signed off, and we just didn't quite get those orders out. Now sometimes in that process, management can have a question about the total value of the deal, or the investment and so forth, so for example, there is a well-known ringi process in Japan, and one of our deals in Japan was in the ringi process. Upper management had a question about it that delayed it, so we are back answering those questions and rebuilding an ROI, but all of those deals had been past the competitive selection process. We had won the deals and in most cases they were expansion orders in our installed base, and we just didn't bring them out in time. Jonathan Maietta - Needham & Company: Okay, and then Neil, with regard to headcount reductions, is there a preponderance of headcount reductions in G&A, Sales and Marketing, or is it pretty much prorate across-the-board on the OpEx lines?

I would say you should think of it as relatively prorate. Jonathan Maietta - Needham & Company: Okay. Thank you.

The next question is from Mr. Philip Alling, Bear Stearns.

Thanks very much. Dick, I was just… wanting you to circle back on a brief comment you made with respect to the 2010 targets. You said not changing those at this point, given the shortfall that you had this quarter, could you comment on the demand environment out there, and are you seeing anything differently, with respect to close rates and initial inquiries from customer prospects, and at this stage of the game, what would give you confidence that you could affirm those longer term goals, given the shortfall you had this quarter?

Well, I don't really think we saw a lot of demand change in the marketplace, and when we went back and looked at the forecast and talked to the salespeople, we didn't see sort of customer demand changes. We had a really strong quarter in Europe, China and the Asia-Pac region, absent Japan continued to perform pretty well. I think we just had sort of an execution issue in some of these large deals. We didn't really have in the quarter, and this is just I would call it more timing than anything else. We didn't have a lot of contract renewals that happened to come due in this quarter from one of our large established customers. Oftentimes when a large customer has a contract that comes due, it is an opportunity to negotiate maintenance and product and services and new acquired software that we had, and you re-bundle a deal in that installed base account. We didn't have any of those contracts that came due in the third quarter, so there was more of a reliance on sort of traditional deals, where you create an ROI around value and the globalization and so forth, so the demand was strong. We just didn't execute on all of those larger transactions.

Okay. And then my follow-up question, for Neil, with respect to visibility, given the unexpected shortfall in the quarter, have there been any changes in sort of the methodology and evaluating the pipeline, and maybe you can give us a bit more color, in terms of where the shortfall really surprised you in terms of the quarter, and any changes that you may make going forward to mitigate the likelihood of such shortfalls, at least in terms of your view of the likelihood of hitting those numbers going forward?

Yes. In terms of the pipeline, you can imagine that we are very busy scrubbing the pipeline in the wake of what happened in Q3. We want to be appropriately conservative in Q4, and we want to do the best we can to understand how that pipeline plays out over the next four quarters, so there is no question about that. I think that is kind of a natural reaction to having the shortfall that we experienced in Q3. In terms of what surprised us in Q3 from a revenue perspective, obviously when you look at the results, the shortfall in the desktop business surprised us particularly in license. We did not expect to see that, and some of these surprises by the way are kind of overlapping surprises, right? The softness in North America as Dick mentioned earlier surprised us a little bit, and we have been having some difficulty in Japan as you know. I would say that the Japan shortfall was larger than we expected, and was primarily large deal dependent. Dick alluded to that earlier and that surprised us as well, so if we had to point to a couple of areas that were most surprising to us on the downside, those would be them.

Thanks much, Neil.

Yes.

Next question, please?

The next question is from Mr. Mike Olson, Piper Jaffray.

Hi, thanks. Do you feel like the expense reduction that you are doing now is going to be enough to help you get to the FY 08 20% operating margin goal, or is there more that is going to need to be done in '08 to get there, and also can you talk about how operating margins could look by quarter throughout the year to get you to the 20%? I would guess it is fairly heavily back-end loaded, but any just thoughts on that would be great.

Well, Mike, I am not going to, we are not going to comment on what fiscal year '08 will look like at this point in time. We will definitely do that on our fourth quarter call in a couple of months. As far as your first question around whether the current expense reduction is enough, I think what we were trying to communicate is that we have taken some action this week, and we are going to make some other decisions around facilities related to additional offshoring or globalization of our workforce. That will drive facilities decisions and that will drive additional cost decisions for the Company that will take place in Q4, and perhaps beyond in to FY '08 for sure, so we anticipate, so we don't mean to imply I guess is what I am trying to say, that the cost reduction action that we took really in the past week is expositive of what we are doing here. We are planning to take some additional activity associated with globalization of our workforce over the time period that I mentioned. I will take the opportunity to say at the same time that maintaining our direct sales capacity and channel capacity at the same time is very important to us, and so we are being very careful that that capacity is motivated, and that we continue to have the kind of low turnover we have had in our sales force that has contributed to our past success.

Okay, and then just one question as far as Asia. What do you think is kind of causing the weakness in the channel in Asia now, and what do you think can be done to remedy that? Thanks.

Well, the biggest weakness that we saw in the channel in Asia was in Japan. We are going through some fairly significant transformations in our distribution model over there. I think that we will be prepared to comment more on those transformations on our Q4 call. But I think that is really what caused the weakness in the channel, or in part caused the weakness in our channel business in Japan. Our channel business was also somewhat disappointing in the Pac Rim but not nearly so. And our channel business generally speaking in the Pac Rim has been very, very strong, and so I don't view that as a trend. I view that as an aberration.

Okay. Thanks.

Next question, please?

The next question from Mr. Sterling Auty, JP Morgan.

Yes, hi, guys. I am still a little confused when I look at your deals over a million, it seems like you still have pretty good performance in the quarter. I am kind of curious what you thought your performance was like in kind of your average deal size, so the bulk of the volume deals?

Well, on our deals over a million, a couple of comments. First of all, we had expected large deal activity in excess of 40 million this quarter in-line, in keeping with the guidance that we gave to Wall Street, which would have been up from around 35 million last quarter and last year, so we would have expected $5 million to $8 million of additional large deal activity, which didn't take place so that is the first comment. Secondly, I think the double whammy there really was that if you look at the license versus service component of the large deal activity, it was much more heavily weighted this quarter towards services revenue than license revenue, and that of course is a lower profitability outcome for the Company.

Okay. And then can you discuss what changes may have been already made, in terms of North American sales, to help correct the issue here in North America?

Well from a standpoint, first of all just echoing on what Neil said earlier, if anything we need to increase the capacity of our sales organization. I mean the products are strong. The maintenance is at an all-time high. The number of users of our software is at an all-time high. The customer satisfaction is at an all-time high. Many of you went to the User Group meeting down in June. There is a lot of enthusiasm in our large base, so we are going to, one of the things we haven't been able to do is we have been raising our margins while growing, has been to really sort of invest in capacity both for the channel and the direct sales force, and one of the things I want to do next year is add capacity, because the products are good and the customers are happy, and that's one of the initiatives that we go offshore is going to give us money to invest I think more in sales. With respect to sort of the North American execution this quarter we will go back and look at what is happening, but I was describing earlier, one of the anomalies in this, we actually executed really well in the large deals vis-à-vis a year ago, and the prior quarter. There were no deals though. Typically, there are four to five deals in there where a customer's contract comes due and they must upgrade. They must renew the contract or they fall off maintenance. In the third quarter, we had no deals like that, zero. For example, this quarter we had visibility on six deals where customer contracts, large ones come due, and we will reevaluate those and renegotiate them, so in a funny way, the execution wasn't bad. It is just that they were all what I would call value deals versus renewal deals, so we are not going to take. US has had great performance for the last three years. We will go and work with them to find out what the forecast looks like, and then again I think we tried to give you a conservative picture for the quarter.

Okay.

We are not going to make any sweeping changes to the North American sales force. The productivity and the execution has been outstanding for a long time.

Okay. Thank you.

Next question, please?

Your next question, Mr. Tim Fox, Deutsche Bank.

Thank you, good morning. One question about the deals that were pushed out over the past four or five quarters you have actually had several competitive displacements, and I am wondering, those are a rarity in the high end market as we all know. Just wondering if any of the deals that you had forecasted, or that you still have in your pipeline, are of that type of competitive displacement, given that those are typically harder to close?

I am trying to think. Of the four or so deals that we sort of had that had gone through the process, and we had them forecasted in that 90% close rate, the Japanese one was sort of, it was a mix. It was a new division, so we are in there, and competitors are in other divisions, so it was a competitive win in a new division that was largely using a proprietary homegrown CAD system and PDM system, it was a combination Product Development system, a combination of Pro-E and Windchill. They were all sort of I would say they were all deals that were in large accounts that have mixed environments where we have won a new program.

Okay. And then just regarding the VAR channel growth of about 3% year-over-year, obviously this is a pretty marketed deceleration over the past year and a half or so. Do you think we are seeing any overall weakening in the mid-range to low end market at this point? I know you suggested it was largely due to Japan, and then a bit of an aberration in Pac Rim, but is all of that deceleration accountable for just those geographies, or are we seeing something more distinct here from a pricing or competitive dynamic?

Tim, it's all in those geographies. We are not seeing slowdown in the overall SMB market. We are challenged as our distribution model evolves, and we develop these larger strategic account relationships, and we migrated the direct sales force up to focus on larger accounts. We are challenged to have the channel fill in behind those direct reps, and that is a challenge with an evolving distribution model, but I don't think there is anything new with respect to that challenge in Q3. And our Q3 result really reflects disappointing Asia Pacific performance.

Tim, also keep in mind that as we grow the channel, the fastest growing piece of that revenue is license revenue. There is really no services revenue that comes through the channel. That is all work that as we grow the channel and give our accounts to them, we are giving them the services business, and we are no longer taking that services business, and so then maintenance obviously is going to be a slower grower than license, so as we have been performing 20% plus in the channel, that is really a mixture of like 30% license growth and more like 9 or 10% maintenance growth, and that is exactly what we saw in North America and Europe this quarter.

Great. Thank you for that.

Next question, please?

Your next question, Mr. Ross MacMillan of Jefferies.

Yes, thanks. Neil, could you update us on the cash flow number for this year? I know that you have got some additional charges in there, but do you have like a number for the full year operating cash flow?

Yes, I think we will probably land somewhere in the $100 million to $110 million range, Ross, based on the guidance we gave of being at $250 million on the Balance Sheet at the end of the year.

Great, thank you.

You are welcome.

And then on the enterprise side, you have grown that about 8%, license growth year-to-date 8%, and I know there were tough compares last year, but how do you guys think about the right growth for the enterprise business on new license sales? Is it 8 to 10%? Is it above that? What do you think is sustainable there?

From an enterprise license perspective? I think we have talked about in the past that we are looking for overall enterprise growth in the 18 to 20% range. We have been achieving that this year. You are correct in pointing out that the license growth has been lower than the total enterprise growth. And certainly, our objective would be to have our license growth for the Enterprise Solutions business on par with or above the overall Enterprise Solutions growth rate, and that did happen last year and this year, you are right. We have some tough comps and we have been a little bit lower on the license side.

Okay. Thank you. And maybe one last one. Any of the four deals already closed this quarter, or are they still all still work in progress?

They are still work in progress.

Okay. Thank you.

Next question, please?

Yes, the next question is Mr. Sasa Zorovic with Goldman Sachs.

Thank you. So going basically again at sort of a shortfall here, what if you were to look at your shortfall, what percentage would you say has come from the Direct business versus the Channel business in Japan and rest of Asia?

Well, Sasa, this is Neil. Just taking the overall shortfall in license revenue, the shortfall in the channel business was a small component of that, so if we had given guidance I think which we did from 235 to 240 in total revenue this quarter, and we did 225, so you want to call that a $12 million or $13 million shortfall against the middle of our guidance, the channel piece is 2 million to 3 million tops, and the balance in the direct business.

Now in the direct business it was not just very large deals. There were several somewhat smaller deals as well, that really didn't close, so what I am wondering, how are you then sort of adjusting for that, maybe not in the overall sort of capacity of the sales which you do want to expand, but rather structurally or maybe then is it with giving projections, so what can be then addressed as far as that is concerned?

I am not really sure I understood your question. It is true that the shortfall in Desktop Solutions license revenue was not completely related to large deal activity. I think we have also said that we are not going to get, one quarter doesn't really a trend make for the business, so we will be appropriately conservative in Q4, and we will see how Q4 plays out, and then we will decide what we need to do in terms of responding to what we see at that point in time.

Okay. And also could you give us an update on your buyback program, or how you look at it at this point, given sort of where the shares are?

Sure, I think we announced a program that was basically to repurchase roughly up to $40 million worth of our Common Stock, and we began executing the program in the last few days of May, shortly after that program was approved. We then went into our quiet period which we come out of in a couple of days, and we will continue to execute that program, as long as the share price is at a range where we think it is justified to do so.

Perfect. Do you think it is at the range where it is justifiable to do so?

At today's current price, we continue to execute against that program.

Thank you.

You are welcome.

Next question, please?

The next question is from Mr. Yun Kim of Pacific Growth.

Thank you. First I have a quick question for Jim. Can you remind us when the next major releases are for Pro-E Wildfire and also Windchill?

Yes, actually there is some exciting news on that front. Our Windchill-9 release is coming out this quarter. I will point out I probably said this before but it is the biggest single release of software this Company has ever produced. So it is a very substantial release, lots of new modules, lots of new capabilities, lots of excitement from people who have been beta testing it, and so forth, so that is coming out this quarter, and then our NIX Pro-E release, which will be Wildfire-4 will be coming out in the first calendar quarter of '08, which will be the second fiscal quarter.

And then just a question around Pro/INTRALINK adoption, how has the Pro/INTRALINK adoption done in the quarter versus prior quarters? I know there is not much, a lot of revenue associated with the adoption per se, but it sounds like the adoption is very important for you guys, in terms of being able to upgrade customers who are likely to buy add-ons, and potentially down the road buy some Windchill products. Wanted to just get some color around how the adoption is going.

Yes, I think first of all as a customer moves from the previous generation standalone Pro/INTRALINK solution, to the so-called 3.x solution, to the Windchill based Pro/INTRALINK solution, they can do a side grade, where they stay at the same level of capability, and just move to a new architecture, or they can do an upgrade, where they move to a richer set of capabilities on a new architecture. A fair number of these customers do an upgrade in the process, so there is a revenue opportunity, and I think the Windchill business has had pretty decent growth. I think that there has been a good pipeline of base business coming out of these upgrades. There is a smaller percentage of upgrades done, a large percentage of upgrades in-process, and I think it continues to be a driver of revenue growth in the enterprise business that has got a lot of runway left to it.

Typically how many of those Pro/INTRALINK upgrade deals are typically seven figure deals?

Seven figure deals? The minority clearly.

I think that would be only if they are taking the opportunity to buy other software with, at the same time that they are doing their upgrade. It would be mixed with other stuff. We typically see with our very large deals, our deals over $1 million that is not just on one product line, right? That is a mix of Desktop Solutions and Enterprise Solutions, so we wouldn't typically see just an upgrade being over $1 million.

Yes, and I think the important thing to remember is that as people move to the new architecture, now it becomes so much easier for us to sell them the breadth of the rest of our Product Development systems solution, so if somebody does a side grade in that transaction, there is services revenue but not license revenue. But it now sets us up to do numerous license deals over time, because they are on our mainstream architecture, and if they do an upgrade, that is they move to a richer configuration, they still are now lots of new things we can sell them, so even an upgrade is only, you know, an upgrade to a limited extent, and there is still a terrific amount of new software now, that we can attach on to that system over time.

Okay, great. Thank you very much.

Thank you. Next question?

The next question is Mr. Chris Rowen of Soleil Securities.

Hi. Can you give us a dollar impact for the 200 headcount reduction, and also are you getting a full quarter impact in the fourth quarter from that and the other reductions you are making, or do you expect there to be a higher impact in the first quarter, and then what did you get in terms of Arbortext and Mathsoft results? Are they tracking to plan, or now that they have anniversaried are they starting to trail-off?

I will try to address those questions. First of all, in terms of a full quarter impact, the answer is no, because those actions were taken this week, so that is the answer to the first question. In terms of the dollar impact, it is all reflected in our Q4 expense guidance. Our Q4 expense guidance is I think roughly flat with Q3 at $196 million, the number prior to those reductions would have been more like $203 million or $204 million, and we talked about three different types of cost reduction activity; headcount reduction, deferring travel and meetings, and slowing down considerably hiring. So all of those actions contributed to that $7 million or $8 million worth of expense savings. And then I think your last question was on the trajectory of Arbortext and MathCAD, and as you know, we don't report separately on the revenue for either one of those acquisitions, but I will say that with respect to MathCAD, we continue to be encouraged by how our revenue is performing there. It is exceeding our expectations, and I think we have talked about previously that the Arbortext acquisition has fallen short of our initial expectations, in terms of overall revenue growth, but it is proceeding in accordance with our current expectations.

Thanks a lot.

I would also add, Chris, on the expenses, keep in mind that you can't do simple math on this, and just sort of say what do 200 people cost and take it out for the run rate for FY '08, because we are globalizing, so some of those will come back in other geographies at a lower cost.

Okay. Thank you.

Yes. Next question please?

Your next question is Mr. Richard Davis, Needham & Company. Richard Davis- Needham & Securities: Thanks. Just one question. With regard to the IBM relationship in China, where does that stand vis-à-vis your expectations, both currently and in the future?

I think, Richard, the IBM relationship in China is pretty much similar to the way it is across the world now. I think that it is a good relationship. They have announced this strategy, this PDIF strategy which is their plan to go after the PLM market. It includes a number of partners that PT is one of those and probably a favored one. And so we have sort of monthly forecast calls, the sales guys with their sales leadership, and we track deals that we are working on together, and I think we continue to see the pipeline grow, and that we work on those deals together, but again, it is sort of a joint selling opportunistically sort of joint selling relationship, and to the extent that we continue to win deals together, we get more and more references that go back and forth, but we are not really relying on IBM for upside in our forecast or our business. It is nice to have a partner like that, that we can work with not only on the sales side, but also on the deployment side, and again, I think as word spreads in our sales force, and there is that we can win together, we will see more opportunities where we work together. Richard Davis- Needham & Securities: Okay. Thank you.

I think we have just got time for about one more question.

Thank you. This is Steve Koenig [ph], KeyBanc Capital Markets.

Hi, thanks for fitting me in here. I was wondering about Agile. Are you seeing any less of them, or have they gone a little quieter in the market, and is there any impact on your enterprise growth? Is it helping you in the market there?

It's an interesting question. I would say actually that in the short-term, even this quarter, if anything, the Oracle acquisition might have slowed a couple of deals down, where we had clear wins, and their financial position and technical position, which had become so weakened, was such that we had some real deals lined up. I think the Oracle acquisition eliminated some of those concerns, financial concerns about the Company, and slowed some deals down actually. I think longer term, depending upon what Oracle decides to do with it, and I think the same is true with Siemens UGS, there is a good opportunity for sort of confusion and lack of investment necessarily in to some of those companies, because they are relatively small compared to the parent, and we think and anticipate there is going to be some upside opportunity,. But I think in the short-term, there were some Agile deals that we had keyed up, that got delayed a little bit, while the customers looked at the impact of the acquisition.

Yes, it is Jim, and maybe I can add a little comment to that. Dick mentioned that Agile was weak both financially and technically, and I think that Oracle instantly propped them up from a financial standpoint, but really hasn't declared any technical strategy. And I am not sure what they are going to say that would make the customers comfortable that that Agile PLM system they bought, really has a future inside Oracle, so I think that the financial thing is easy to do quickly, and the technical question that is in the customer's mind hasn't gone away, and isn't easy for Oracle to answer, given the complexity of Oracle, and the fact that Agile is sort of a fly in the elephant's ear.

Okay, great. Thanks a lot.

Thank you, Steve. Dick, any last comments?

That is it. Thank you very much, and we hope everybody is having a good summer. We expect to execute in the fourth quarter here, and we will look forward to talking to you in October. Thanks.