Howard Kalt - Public Relations, Kalt Rosen Group/Ruder Finn Charles Liang - Chairman and Chief Executive Officer Howard Hideshima - Chief Financial Officer

Glenn Hanus - Needham Jeff Fidacaro - Merrill Lynch John Roth - Argand Capital Manoj Nadkarni - Chip Investor Group Curtis Thom - Broadpoint Securities

Good day ladies and gentlemen. Thank you for standing by. Welcome to the Super Micro Computer, Incorporated Third Quarter Fiscal 2008 Conference Call. At this time, all participates are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for your question. I would like to remind everyone that today's conference is being recorded. And now, I would like to turn the conference over to Mr. Howard Kalt of Super Micro Computer, Inc. Mr. Kalt, please go ahead, sir. Howard Kalt - Public Relations, Kalt Rosen Group/Ruder Finn: Thank you, Erica. Good afternoon and thank you for attending Super Micro Computer's conference call on financial results for the third quarter of fiscal year 2008, which ended March 31, 2008. With us today are Charles Liang, Chairman and Chief Executive Officer; and Howard Hideshima, Chief Financial Officer. By now you should have received a copy of today's news release that was distributed at the close of regular trading. A copy of it also maybe accessed either on the Company's website, www.supermicro.com. Before we begin, please note that during the course of this conference call management will be making forward-looking statements within the meaning of the Securities Act of 1933, and the Securities Exchange Commission of 1934. These forward-looking statements may involve judgments based on information that is available now, but is highly likely to change overtime. The Company will not necessarily inform you if and when those judgments and the underlying information change. Company policy is to provide material information only in news releases, widely-available conference calls, or filings with the SEC. Additional information concerning factors that could cause actual result to differ materially from those in today's forward-looking statements are contained in the Company's SEC filings, as well as in today's news release. I would add that the Company operates under the requirements of Regulation FD. As a result, Super Micro Computer provided advanced notification of this conference call by way of a news release issued on April 22, 2008. Like most companies, today we will be taking questions only from securities analysts and institutional portfolio managers, but the complete call is open to all interested parties on a listen-only basis. The Company will continue to talk with investors individually and in small groups, but those discussions will no include discussion of any material non-public information If you're interested in such a meeting; please contact me at 415-692-3059 or via e-mail on the Company's Investor Relations page of the website. I'll now turn the call over to Charles Liang, Chairman and Chief Executive Officer. Charles?

Thank you, Howard, and good afternoon, everyone. This quarter our revenue reached 136.8 million, which is an increase of 29.4% compared to the same period last year. Net income of $5 million is 23.4% higher compared to a year ago. The March quarter is traditionally a slower season in our history, as well as in the industry. Moreover, we have seen increasing investments in both our R&D headcount and infrastructure to drive our long-term growth potential. Nevertheless our year-over-year net income growth was 23.4%, which a wider industry average growth is less than 6%. In this coming quarter I am confident that we will see a consistent growth in revenue. And the net income should be slightly improved from last quarter. Although, we will keep strong investment in R&D. Super Micro has been a technology-oriented company with multicultural. Although we are having such a strong momentum year-by-year, our company's potential is still underestimated. Yes, we are still a small to medium sized company, but we are continuing to grow at more than three times faster than the average growth rate for a server industry. We continue to invest aggressively in R&D for long-term growth and profitability. We strongly believe that our technology foundation and leadership have been and will be the key for our customers' success. Our High Efficiency Server Building Block solution, incorporated with our expertise in technology and design, is highly demanded by partner and customers who are seeking for maximum system optimization, performance per watt, and cost-effectiveness. Our business has never been as strong as it is today. In particular, we continue to invest in improving our Blade server technology. Our Intel CPU-based Super Blade recently achieved an industry beating performance per watt milestone of 290 gigaFLOPS per kilowatt, 290 kiloFLOPS per kilowatt. The performance is about…

Thank you, Charles, and good afternoon, everyone. First, let me point out that our GAAP number's here in the new release, so I will discuss earnings, gross margins, operating expenses and similar items on a non-GAAP basis, which reflect adjustments to exclude stock compensation expense. Reconciliation of GAAP to non-GAAP is included in the financial statements of the company in today's earnings release. Let me begin with a review of third quarter income statement. Revenue of 136.8 million for the quarter was up 29.4% from the same quarter a year ago. The growth was led primarily by the increase in our components business, primarily motherboards and chassis, which increased 32.9% year-over-year or 22 million to 88.9 million. Our server business increased by 23.5% year-over-year, or 9.1 million or 47.9 million. Unit volumes on server systems increased 20.6% year-over-year, from 34,000 to 41,000 units. ASPs for servers were about the same on a year-over-year basis of approximately $1200 per unit. The increase in server revenue was primarily due to higher sales of our OEM and bundled server solutions utilizing our high efficiency power supplies, and sales of new products such as UIO and 1U Twin. We continue to maintain a diverse revenue base, with none of our approximately 400 customers making up more than 10% of our net sales in the third quarter. Furthermore, 58% of our revenues came from the US, and 62.8% from our distributors and resellers. Internet Data Center revenues was 10.6% compared to 3% in the third quarter of fiscal year 2007. On a sequential basis, net revenues were about the same from 36.9 million in the second quarter of fiscal year '08. Non-GAAP gross profit was 25 million for the quarter, up 37.5% from 18.2 million in the same quarter last year. Non-GAAP gross margin was…

Thank you, Howard. I do believe that our strong investments in R&D and infrastructure during the past three quarters will produce strong growth in our near and long-term business. Our 290 gigaFLOPS per k/watt Blade server that outperformed much above the industry standard, and our concern Intel QPI base, it is called [DOT-9], will prove our vision quickly. We have also strength our working partnership with our vendors and customers, both old and new. I am more confident today than any time before on the ability of the company to succeed. Thank you. Howard Kalt - Public Relations, Kalt Rosen Group/Ruder Finn: Operator we are ready for questions.

(Operator Instructions). Our first question comes from Glenn Hanus with Needham.

Good afternoon. Could you maybe talk about what you're seeing on the competitive front from a pricing standpoint, and what your outlook is on gross margins for this quarter?

Yes, basically if the competition is strong, however, we have a very strong new product line, that our 1U Twin still growing in revenue, and that is a very unique product. So, for those products we still have a very good margin. With our SuperBlade product, I just mentioned we reached 290 gigaFLOP per k/watt. Those are very outstanding products, and they will allow us to have a good margin from those products. So overall, before market is getting very competitive, especially the soft market. However, here at Super Micro, we foresee our profit, our gross margin, should be still in quite healthy neighborhood. By the way, I mean, back a way I just mentioned our QPI based Intel Quick-Path interconnection, a new product line is getting available. That will help our profitability as well, though.

Thank you.

And your next question comes from Jeff Fidacaro with Merrill Lynch.

Good afternoon Charles and Howard. I am wondering, if you could talk a little bit about the Itanium project, sort of the timing, when we should start seeing product ship, and the impact it has been on R&D in this quarter as well as into the June quarter.

Yes Itanium as you know, it's the highest-end, it is IA Intel architecture product. So, this year we have co-designed with our partner. And the reason why is we foresee with QPI, a QPI interface in the web is really a high performance platform, and really just choice for a mission critical application. So, we commit to design with our partner a prototype QPI available this year somewhere in, we hope, Q4 this year. And we never really committed to a mission critical risk product, so this is a big commitment from the company. And we feel very comfortable for business we took.

Do you think the revenue impact from these products will really ramp? Is it going to be in the back half of this calendar year?

Yeah, it should be very big this year or earlier next year.

Any anticipation of what the impact would be to margins? Is it greater than corporate average? Sounds like these are higher margin type products.

Will be significantly higher NTO base put out, though, because the -- it is although small [medium], but very high-end, high margin product.

Okay. If we shift over to sort of the data center revenues, can you talk a little about the win this quarter? It sounds like you had to be a little bit more competitive to get that customer win, do we see that sort of impact to gross margins carrying into the June quarter as well?

Yeah Jeff, this is Howard. Yeah, we did have this high profile customer come on board. And it just started up this quarter and will continue. We see there's future growth potential in this customer and that's why we did this. And so, it should carry on for the next few quarters, if not longer.

Yes, it is high efficiency computing architecture, and that's our 1U Twin that operates the -- that help a lot.

Great. Thank for your times.

And our next question will come from John Roth with Argand Capital.

Hi, guys. I have a few questions for you. First of all, the tax rate. I understand you had to catch up this quarter. I mean, what would you assume on a sort of normalized basis going forward, assuming that the credit is not reinstated?

Yeah, John the credit actually was -- last year was about 30%, the tax rate, and this year was about 36%. And we anticipate that 36% non-GAAP rate to be about the steady state until and if Congress re-passes the R&D credit, so which time we'll adjust it downward.

Okay. And I just wanted to clarify what the previous caller asked. In terms of the high profile data center customer, you said that you expect their presence to have -- to continue to have a negative impact on the gross margin for at least a few quarters going forward, is that correct?

Not exactly John.

Okay. I guess I wasn't sure whether you were talking about the negative impact on gross margin or the positive impact in terms of the top line from them being there?

Yes, it had a positive impact, and it's just starting with this past quarter, Q3 and we see great future potential in this customer going forward. And so, it's just the beginning with this relationship.

Okay. Well, let me ask the question another way. I mean, if you look at the target model that you guys have spoken about historically, sort of gross margins of 19% to 22% and then working down, I think R&D to 4 and 5%, getting down to an operating margin of 9 to 12. Is that still the company's target model, or is that R&D going to move up from that 4% to 5% range for the foreseeable future? Can you just kind of help me understand what the model is doing, whether it's still kind of static in terms of where you're trying to get or if it's moving around?

Yes, in theory, we did not change the model basically. However, when a change happen, when a change show up, like a couple quarter ago when we know we have a change to co-design Itanium solution, and when we saw the high efficiency computing become very important so we start to emphasize, dedicate even more in high efficiency breakthrough solution, all of those, we decide to hire more R&D engineer. Although that will increase our expense in short-term, however, for long -term we know we will benefit from those R&D investments. So, other than the Itanium and high performance Blade server, in theory we also are start to cooperate with more potential OEM to design some -- really optimize the system for them. So, we start cut-off of project right away, in last few quarters. This is the main reason we increase, indeed, 57% of our engineering headcount, in last few months. We understand this will increase our overhead expense, but long-term this is a really a very good chance for company, though. So not many companies have those chance.

Okay. What was the size of the inventory adjustment on gross margin this quarter?

1.6%, same as Q3 of '07 and about 0.2% of benefit from the prior quarter.

Okay. And I guess last of all its just a comment. I said this to you guys before but I would urge you at the board level to think about authorizing a repurchase. I know you have concerns around the liquidity of your stock, but its always good in my view to have the authorization in place so that when you have dislocations like you had over the past few weeks you are able to take advantage of those and ultimately if you do have confidence in where the business in going. You know the repurchases at these sorts of levels will certainly be accretive to shareholders over the long-term.

I understand John and I appreciate the comment.

Okay, thanks.

(Operator Instructions). And next we'll hear from Manoj Nadkarni with Chip Investor Group.

Hi good afternoon. Can you please talk more about seasonal factors? Generally the PC market is slower in the second quarter if you look at Intel's guidance their revenue is lower sequentially. So what is different about the server market and about Super Micro that gives you confidence for sequential improvement?

Yeah I mean that is historically. We have a lower quarter in March quarter and that why just mentioned PC market can be a little bit soft, I mean, recently. However, at Super Micro we are quite different from the industry in last many years. And I believe this year we'll have the same chance because, I mean, our business is pretty much based on technology. So, whenever there are new product lines, new transition of technology, then in that timeframe we usually got a much better trend. This year, basically no exception, right? Our kind of Blade server just available, our QPI solution is getting here and AMD just agreed to ship their Barcelona CPU. So, all of those make us feel very comfortable for this quarter and the coming quarter.

Okay. Can you give any color on which end markets and geographies you are seeing strength?

Pretty much our market is world wide and recently we found a market in Europe and Asia should be a two area, I mean we have big room to grow. But even in the United States recently we have approach some high profile account aggressively. And we are ready reach certain level of success. So we at this moment, I can say we have a good confidence on growing the business in the United States as well.

Okay. And about 44% of your sales are international. So how much does the weakness of US dollar help you?

All our transactions are denominated in United States dollars. So that really doesn't affect us from a currency exchange rate.

No but I mean you're customers in Europe will find your products much cheaper right?

Absolutely. That is a healthy…

Yeah in Europe and China yeah that will be a kind of a fundamental -- I mean, a hidden advantage, right?

Okay. Thank you.

Because there cost is low.

Thank you.

(Operator Instructions). And our next question comes from Curtis Thom with Broadpoint Securities.

Hello, Howard and Charles. Good afternoon.

Hi.

Hi.

I appreciate what Charles said about the strength of the new products offsetting the macro weakness. I was wondering if you could quantify the macro weakness that you're seeing, and if -- and how we expect that to continue?

Yes. Curtis, this is Howard. Yes, we've given the guidance. Again, we can see that some of these new products the new products that Charles has talked about we've invested on will help us counteract some of this economic weakness. We've given a range of 142 to 147, which is a good growth from prior year quarterly run rate. So, again, we don't see a slowdown with regards to our being able to deliver products to customers given the new products we have and the seasonal strength of the quarter. Curtis?

Mr. Thom, is there anything further?

Yes, maybe I can add a little bit more. That 1U Twin, although we introduce that product about one year ago, and today we still almost the only one really strong in 1U Twin kind of high density computing. And recently we just add couple of other form factors, still 1U Twin but in form factor that is to optimize. 1U Twin solution for Siemens application. So, with the new 1U Twin with QPI coming soon, we start our own also with our 293 gigaFLOW per k/watt Blade server. Indeed, the growth will be quite -- we are optimistic about our growth.

And we move on to a follow up from Manoj Nadkarni.

Hi, I have question about this reclassification of about $80 million to long-term securities. Can you give us any details as to what type of securities those are, and if you are taking any unrealized losses?

Yes, we did take about 600,000 of unrealized temporary impairment charges. The securities are primarily, to small extent, student loans, to a large extent closed end option rate preferred shares of municipal funds, tax-exempt. They're very -- they're all AAA-based and well secured.

And are they guaranteed by department of education or any state or federal?

The student loan ones are guaranteed by the Federal Family Educational loan, 100%.

Okay. And secondly I have question about cloud computing There has been a lot of talk about cloud computing. What type of products do you have and what revenue opportunities do you see in this area?

What you mean by cloud computing?

Cloud, cloud computing.

What it is?

Cloud like Amazon, Google etc, renting their computing facilities to other companies.

Yeah. Yes, we do obviously have we have a lot of different customers that are selling- we're selling to a number of different applications. We have a little less visibility into that space. I do believe that some of our Internet customers would fit the bill that you're talking about there.

So, this would be broadly under the data center computing?

That's correct. And we have a fairly high percentage of our sales go through Disc G Network, so we have a little less color with regards to the final end customer.

All right. Thank you.

(Operator Instructions). It appears at this time, we have no further questions. I would like to turn the conference back over to Mr. Liang for additional or closing remarks.

Thank you. Thank you for joining us today. We look forward to talking to you again at the end of this quarter. Thank you, everyone. Have a great day.

That does concludes today's conference. We do thank you for your participation. Have a great day.