Bob Blair - IR John Coyne – President and CEO Timothy Leyden - CFO

Andrew Neff – Bear Stearns David Bailey – Goldman Sachs Rich Kugele – Needham Mark Miller - Brean MurrayCarret Steve Fox – Merrill Lynch Mark Moskowitz - JP Morgan Keith Bachman – Bank of Montreal Christian Schwab – Craig Hallum Harry Blount – Lehman Brothers Shebly Seyrafi – Caris Aaron Rakers - Wachovia Jeff Brickman – UBS Joel Inman – Robert W. Baird

Welcome to Western Digital's first quarter financialresults for fiscal year 2008. (Operator instructions) Now I will turn the callover to Mr. Bob Blair. You may begin.

Thank you. As we begin, I would like to remind you that wewill be making forward-looking statements in our comments and in response toyour questions concerning our expectations regarding supply and demandconditions in the hard drives industry; growth in the market for hard drives;and growth opportunities for WD; the effects of strong seasonality in theDecember quarter; our plans to continue investing in new technologies andproduct road maps; our beliefs regarding the benefits of a vertically integratedhard drive business; our capital expenditure plans for fiscal 2008; and ourcurrent financial outlook for the December quarter. These forward-looking statements are based on management'scurrent expectations and are subject to risks and uncertainties that couldcause actual results to differ materially, including those listed in our Form10-K filed with the SEC on August 28, 2007, as well as the additional riskfactors reported in this press release included as Exhibit 99.1 in the Form 10-K, we furnishedto the SEC tonight. We undertake no obligation to update our forward-lookingstatements to reflect new information or events, and you should not assumelater in the quarter, that the comments we make today are still valid. In addition, references will be made during this call tonon-GAAP financial results. Investors are encouraged to review these non-GAAPfinancial measures, as well as the reconciliation of these measures to thecomparable GAAP results on the last page of our press release, financialstatements included as Exhibit 99.1 to the form we furnished to the SEC today,a copy of which can be found under the SEC filings link in the investorrelation's section of our website at www.westerndigital.com. I would now like toturn the call over to Western Digital’s President and Chief Executive OfficerJohn Coyne.

Good afternoon and thank you for joining us. With me todayis Tim Leyden, Executive Vice President and Chief Financial Officer. After myremarks, Tim will provide the financial report on our first quarter and ouroutlook for the second quarter. Our financial results for the first quarterreflect a continuation of our profitable growth in a strong market environmentthroughout the quarter. The September quarter was unusual in that we saw strongindustry demand emerge early in the quarter, and sustain throughout. This wastrue in all geographic regions, markets and channels that we serve. With public reporting of quarterly financials in the harddrive industry now completed, it is clear that the improved demand combinedwith disciplined production increases allowed more stable pricing, whichresulted in an improved industry-wide financial performance. Through October, industry conditions have been seasonallystrong. We believe that growth of 12% to 15% year over year and 4% to 5% quarterover quarter is likely in the December quarter. Distribution and manufacturers inventoriescombined are down year over year by some of 11% exiting October. Based on current demand and factory build rates,we believe that the industry would be much better positioned entering theJanuary to March quarters than in recent years. At WD, our capacity is constrained relative to currentdemand. As a result, we are working diligently to treat all customers fairly inthis constrained environment. We expect that we will see allocation on certaincapacities continue through out the quarter. In the first quarter, our investment strategy, productportfolio and execution in all market segments enabled us to address robustdemand for mainstream and high capacity hard drives in both consumer andcommercial applications. We posted year-over-year hard drive growth of 37% inrevenues and 29% in unit shipments. Combined with our solid performance in theMarch and June quarters, the WD business model has demonstrated our ability todeliver strong results in both good times and in the periods where we faceindustry headwinds. Each of WD's businesses – desktop, consumer electronics,branded products, mobile and enterprise SATA -- turned in strong performancesin Q1. As a result of our multi-year diversification strategy, for the firsttime we derived more than half of our quarterly revenues in the hard drivespace from non-desktop applications, 53%, up from 35% in the year-ago quarter. This greater diversification of our revenue base is a resultof the investments made and our execution of the new product plan over the lastseveral years, during which time we have become the world’s second-largestmaker of hard drives. The breadth of applications for hard drives is a majorbenefit for the industry and especially for those of us who have the ability tocontinue investing in future technologies and product roadmaps. The company's unit shipments for the first quarter includedapproximately 5.9 million 2.5 inchmobile hard drives, up 175% year over year and approximately 3.7 million 3.5 inch hard drives for use indigital video recorders, an increase of 51% year over year. Branded products revenue, which increased 133%year over year, accounted for 18% of the Q1 total, continuing to demonstratethe strength of WD's global brand. We addressed strong demand for higher capacity points ineach of our segments with hard drives based on our own PMR technology. Mostnotably, our 2.5 inch,250GB WD Scorpio hard drives and our 3.5 inch WD Green Power 1TB drives. Both of these drivefamilies are based on our industry leading 200GB per square inch PMR technologyplatforms. Earlier this week, we began shipping anotherindustry-leading product. Our current generation PMR WD Scorpio mobile drive,based on our own 250GB per square inch PMR technology in capacities of up to320GB. Turning to our media acquisition, integration of the mediaoperation is proceeding smoothly, according to plan. We recently completed ourfirst worldwide operations review in Asia, involving themedia team along with the rest of the WD operations and engineering teams. Weare very excited about our ability to capture the synergies and advantages of avertically integrated hard drive business, thus enabling us to compete evenmore effectively on the basis of our quality, reliability, customer service,technology and execution as we address the tremendous opportunities forprofitable growth in the storage marketplace. Tim Leyden will now provide our financial report andoutlook.

Thanks, John. Western Digital's execution and revenuediversification strategy, coupled with strong hard drive demand and stablepricing enabled the company to deliver outstanding financial results. Revenuefor our first fiscal quarter was $1.766 billion. This includes $40 million ofrevenue from external sales of media and substrate components, shipped in theperiod between September 5 and September 28. Total revenue was up 40% from the prior year, and hard driveshipments total 29.4 million units up 29% from the prior year. Average harddrive selling prices were approximately $59 per unit, up $3 from the year-agoquarter, and $4 from the June quarter as a result of firmer pricing andimproved product mix. We shipped 5.9 million 2.5 inch mobile drives in theSeptember quarter, as compared to 2.2 million in the year-ago quarter and 3.8million in the June quarter. Our growth in this important segment demonstratesthe continued acceptance of our leadership products by notebook PC manufacturers,together with increasing demand in the mobile storage appliance market. Turning to consumer electronics, we shipped approximately3.7 million 3.5 inchdrives for use in digital video recorder in the September quarter, versus 2.5million in the year-ago quarter and 2.7 million in the June quarter. Thismarket continues to be a long-term growth opportunity for WD and the industry. Channel revenue was 51% OEM, 31% distribution and 18%branded products versus 52% OEM, 37% distribution, and 11% branded products inthe year-ago quarter. There was 47% OEM, 36% distribution, and 17% brandedproducts in the June quarter. The Q1 OEM revenue percentage includes $40 million, or 2%,from external sales of media and substrates. Revenue for each of our top fivecustomers increased from the June quarter. However, because of the increaseddiversification of our revenue base, no single customer comprised more than 10%of the total. The Q1 geographic split of our business was 33% Americas,32% Europe, and 35% Asia ascompared to 35% Americas,28% Europe, and 37% Asia in theyear-ago quarter. It was 40% Americas,26% Europe and 34% Asia in theJune quarter. Revenue from external sales of media and substrates is includedin the Asia percentage. Our gross margin percentage for the quarter was 18.3% versus17.3% in the year-ago quarter, and 15% in the June quarter, reflectingimprovements in pricing, mix, and costs. Operating expenses totaled $188 million, including a $49million charge for in-process research and development related to the Komagacquisition. Operating income was a $135 million or 7.6% of revenue. Netinterest and other income totaled approximately $3 million. Income tax expense was $69 million for theSeptember quarter, including net non-recurring charges of $60 million. Absentthese charges, our tax rate was about 6.5% for the quarter. During the September quarter, we had $3 million favorableresolution of certain foreign tax contingencies. Also during the quarter, welicensed certain intellectual property to one of our international subsidiaries.This resulted in a tax charge of $63 million. We now expect that our futurebook tax rate will be in the 5% to 7% range. However, I would highlight thatour cash tax rate will continue to range between 2% and 3% for the foreseeablefuture. During the quarter, we adopted FIN- 48, which prescribes themethod by which company should calculate reserves for tax contingencies. Theimpact of that adoption was not material to net income or shareholders’equity. However, it did result inbalance sheet reclassifications between deferred tax assets and liabilities. GAAP net income totaled $69 million or $0.31 per share,excluding the $60 million net tax charge, non-GAAP consolidated net income was$129 million or $0.58 per share. Excluding the net tax charge and the combinedimpacts of the acquisition, non-GAAP HDD net income was a $182 million or $0.81per share. A reconciliation of non-GAAP to GAAP results is on the last page ofour press release, financial statements. Turning to the balance sheet, our cash and short-terminvestments at the end of the quarter totaled $851 million as compared to $907million at end of June. The decrease is primarily the result of the net cashused for the acquisition. As of the end of the quarter, we have drawn down $750million of our $1.25 billion bridge facility. Cash generated from operations during the quarter totaled$219 million; capital expenditures for the quarter where $163 million; non-cashcharges for depreciation and amortization expense totaled $78 million. Following a recent review of demand, capacity, technologyand efficiency roadmaps, capital expenditures for fiscal 2008 are now expectedto be around $700 million, at the lower end of our previously estimated range.This includes about $100 million for our media operations. Depreciation andamortization expense for fiscal 2008 is expected to be about $400 million,including about $100 million for media operations. We have completed the preliminary purchase price allocationrelated to our $1 billion acquisition of Komag. We recorded a $49 million cashfor in-process research and development. In addition, we increased the bookvalue of the media fixed assets by about $130 million and recordedapproximately $100 million in net deferred tax assets; $90 million ofamortizable intangibles; and $85 million of goodwill. The asset valuation assessments indicated longer useful livesthan we had initially estimated. As a result, the incremental depreciation andamortization resulting from these fair value adjustments would be about $5million per quarter. This is includedthe $100 million fiscal 2008 estimates of media depreciation and amortizationreferred to above. During the quarter, we repurchased 841,000 shares of stockat a total cost of about $16 million. Since May 2004, we have repurchased 15.1million shares at a total cost of $204 million; $46 million remains under ourexisting stock repurchase authorization. Our cash conversion cycle was a positive ten days,consisting of 51 days of receivables, 29 days of inventory or 13 turns, and 70days of payables outstanding. Excluding the impact of the acquisition, ourconversion cycle would have been a positive one day, consisting of 48 days ofreceivables, 17 days of inventory or 21 turns, and 64 days of payables outstanding. Now I will move on to our expectations for the secondquarter 2008. It is our intention to break out revenue from a media sales for theDecember and March quarters, until our external obligations are complete. Allother operating results will be reported on a WD consolidated basis. As we indicated on our last call, we expect the mediaacquisition to become accretive in the June 2008 quarter. Longer term, from theend of calendar 2008, we expect that our blended media internal and externalsupply model will enable us to realize cost improvement at the gross marginline of up to 300 basis points. We expect demand for the December quarter to be seasonallystrong; accordingly, we estimate revenue for the December quarter to be between$1.875 billion and $1.925 billion, including approximately $100 million fromexternal sales of media and substrate. Gross margin for the December quarter is anticipated to bein the range of 18.5% to 19%. Operating expenses are projected to beapproximately $163 million, as we continue to integrate media operations andinvest in expanding our product and technology portfolio. Net interest expense is projected to be about $11 million.We anticipate a tax rate of between 5% and 7%, and our share count will beabout 225 million. Accordingly, we estimate earnings per share of between $0.73and $0.77 for the December quarter. Operator, we are now open for questions.

Your first question comes from Andrew Neff – Bear Stearns. Andrew Neff – BearStearns: I wanted to take a step back. You had a really nice quarter,things are going well. Why won’t the industrygo back to – since things are so strong – over building? You are implying thatyou think things might be better in January and March. What is different thistime? How can it be sustainable, and how can we, as investors, feel comfortableabout that?

Andy, there are several positive indicators. One of those isthat as we exited the first financial quarter, the September quarter,inventories excluding enterprise -- 3.5 inch and 2.5 inch drives -- inventories were down 8% year-over-year aswe exited the September quarter, for the total industry. That is manufacturersinventory, product in transit from the plants, product in the OEM hubs, anddistribution owned inventory throughout the world. So that was, in absolutenumbers, was 8% lower exiting September this year than the prior year. As of the end of October, it was 11% lower than it was exitingOctober last year. So I think we're seeing significant production discipline. Idon't think that's an accident. I thinkit's a reflection of the way the management teams in the large companies arelooking at their businesses. I believethat discipline maintained through the balance of this quarter will ensure thatwe enter January in the best position relative to supply and demand balance andstarting inventory that we will have seen in the last five years.

Your next question comes from David Bailey – Goldman Sachs. David Bailey –Goldman Sachs: There has been a lot of comment about double ordering fromthe semi companies into the PC space. Why haven’t we seen this yet in the harddrive space, and what evidence do you have that some of the most egregiousprices won’t back off a little bit?

I think my answer to the prior question is part of it. Imean, our inventory positions are low throughout the industry. Our visibility,particularly in the distribution channel, to the movement of product throughthat channel, the inventories in the channel is very much better than it wasyears ago. Our visibility into the OEM pulls and build rates is alsosignificantly better than it was some years ago; our view of the market todayis that we’re seeing true demand. David Bailey –Goldman Sachs: A clarification, can you help us understand how much of yourCapEx is going toward capacity expansion and how much of it is for maintenanceat this point?

Most of our expenditure at the moment is going on componentexpansion, which is HDS and media, and it is tough to break it out betweenmaintenance and expansion, because when we do any replacements, we tend to getefficiencies also.

I think to elaborate on Tim’s point, as we told you I thinkin the last call some $200 million of that overall spending relates to ourconversion of ‘our wafer fab from 6 inch to 8 inch;that the investment in the initial pilot facility to demonstrate that processtechnology development. Likewise, a significant portion of the $100 millionthat we have indicated relative to the media operations is significantequipment technology upgrades that relates to the 100% transition to PMR overthe course of the coming year. So I think a substantial amount relates totechnology.

Your next question comes from Rich Kugele – Needham. Rich Kugele – Needham: In terms of the mobile, a significant increase in yourproduction there. Has there also been an improvement because of the volume onthe margins for that product line for you?

Our mobile product, a combination of volumes, our technologyleadership in that space have all generated a very good mix and a continuingimprovement in margins in that space. Rich Kugele – Needham: Are we now north of desktop again versus being below?

Let me just say that we are continuing to improve. Rich Kugele – Needham: Obviously even with Komag, your inventory balances were impressive,but can you give us a sense on some of the other line items on the balancesheet ex Komag?

We didn’t have any real changes in the balance sheet otherthan the addition of the Komag items. On the inventories in particular and inthe conversion cycle, we were at ten days positive on the conversion cycle. Whenwe look at that, there was actually a bit of mismatch there, because we had tocount the entire quarter of receivables and also inventory against a very smallamount of gross margin, cost of sales, and revenue. So consequently that was about three days in that ten whichwill be eliminated when we get down to be able to compare that against theentire quarter. That will bring us down to around seven and we expect that wewill go to about five or six in the current quarter. Rich Kugele – Needham: On your external substrate side, obviously there is a lot oftightness there in the market. Can you talk about what you’re seeing for thatpiece of the business since you’re the only company that has 100% their needs?

I think on a worldwide basis, I think the supply of bothaluminum and glass substrates is reasonably well matched to demand. As we’vementioned, we’re continuing to fulfill our external obligations in both media andsubstrate relative to VPAs that are currently in place.

Your next question comes from Mark Miller - Brean MurrayCarret. Mark Miller - Brean Murray Carret: Could you give us in terms of weeks of inventory where doyou think the industry is at and where you guys are at?

Ending the quarter, Mark, we were in our normal four to sixweeks range in distribution. I think inventories are very well situated, as Imentioned, ending October 11% down on the same period last year. I don’t havethat translated into weeks but it is a relatively low number, well towards thelow end of the range. Mark Miller - Brean Murray Carret: The second question would be, there’s been talk about componentshortages, including disk drives, facing some of the mobile PC builds. I’m justwhat effect, if any, that’s had on you in the December quarter and possibly if you’refeeling any effect for the March quarter?

I think it’s exhibiting slightly differently, customer tocustomer. I think most of the issues are being resolved, but not to the extentwhere there is plenty of availability in the system. I think it’s tight and alittle spotty from customer to customer. I think tightness for the wholequarter with timing being an issue from individual customer to individualcustomer. Mark Miller - Brean Murray Carret: Seagate indicated at their analyst meeting that they thoughtHitachi and possible Samsung had --well I’m not going to use their words -- but are behaving themselves. Is it basicallybecause we are just short now in terms of supply, or do you thing there is areal change in management from what we’re hearing, Hitachi, a real pressure tomake some money there?

I think if you look at the sustainedbehavior at Samsung over the course of the last year, we have seen a verysignificant shift in emphasis which we believe is driven by a desire forprofitability and a recognition of Samsung’s structural advantages anddisadvantages. So it appears to me that they are playing to the strength oftheir supply base and becoming, or at least attempting to become, an outlet forthe technology that they are head and media suppliers can deliver to them andthey are focusing on more niche applications within the overall marketplace. I think that is very sensible and I think it is very positivefor industry. When I look at Hitachi,we saw their results announced yesterday and I think that is also encouragingin that the management there seems to be focusing on addressing some of thecost issues and focusing on profitability and this is also very good to theindustry.

Your next question comes from Steve Fox – Merrill Lynch. Steve Fox – MerrillLynch: Just to be clear on the dilution impact from Komag in thatquarter just completed, it looks like volumes allowed it to be less diluted. Secondlyon that, can you just talk about how much, given the strong volume demand, whatkind of dilution are we now looking for, for Komag, in the current quarter?

Well, as you have seen at the addendum to our pressannouncement, we’ve broken out what the media dilution was for the three weeksof September that we owned the business and we have indicated that we would beaccretive in the June quarter. So it will be more or less a straight linebetween those particular points. We’ve also indicated how much we are spendingin OpEx and the other component is the interest rates on the loan that we drewdown. Steve Fox – MerrillLynch: So off of this higher base, we can assume less dilution thanyou were probably seeing a month ago, it sounds like.

Secondly, from here through the end of March as we fulfill ourexternal VPA media obligation and substrate obligations, we then have toconvert that equipment to WD and there are some inefficiencies related to thatin terms of the total utilization of the asset base and the people and somestartup costs related to that so I wouldn’t get too ahead of ourselves there. Steve Fox – MerrillLynch: When you talk to your PC customers, given the outlook youare talking about and it doesn’t sound like you are that concerned about doubleordering, are they taking a more conservative bent in terms of what they expectfrom sales over the next few months given what’s going on in the economy? Oryou are not seeing that from your customer?

I think we are seeing good demand and I think we probablyget a lot more information and a lot more focus on the shape of the USeconomy and the issues in the USeconomy. One of the things that we noticed in terms of a strength,which was across all geographies but particularly strong in Q1 in Europe.If you look at the movement in relative exchange rate to the US dollar relativeto the European economies, and then you factor in the fact that all IT-relatedproducts -- hard drives, PCs, all IT-related products -- are costed and soldessentially in US dollars. European customers, European consumers have 30% more buyingpower than they had at this time last year relative to any discretionaryspending on IT. That, I believe, is one of the key drivers of the strength ofEuropean demand for PCs and for storage appliances and DVR type products. I think to a degree that’s also true in Asia,although the Asia Pacific region growth is probably more driven just by totaleconomic growth in those areas, but again, currencies have strengthenedrelative to US dollar cost.

Your next question comes from Mark Moskowitz – JP Morgan. Mark Moskowitz - JPMorgan: Maybe we can build off of that last question, obviously youwere talking about the currency benefits, I just wanted to get a sense in termsof the underlying trends. What in Europe or Asiais really helping hard disk drives? Is it more the PVR/DVR, the external backuppiece?

I think we’ve seen strong growth across our entire productline. I think there are two elements of play here relative to WD specifically,as distinct from the strength in the industry generically. Our ability to grow revenues37% year over year relative to industry growth in the high-teens isattributable to WD’s focus on product quality, reliability, availability andflexibility. What you see is customers responding to those values andpreferring WD and that’s a worldwide phenomenon and a multi-channel phenomenon. Mark Moskowitz - JPMorgan: Do you feel you are outgrowing your peers in both Europeand Asia from a hard disk drive perspective?

I think we are outgrowing our peers everywhere. Mark Moskowitz - JPMorgan: Can you maybe talk about the overall blend of the ASPimprovement, how much of it was really driven by mix or just better improvementon market share opportunities for WD?

I think we had a number of factors, I think we had a bettersegment mix. We had high capacity mix and we had strength in the enterprise andbranded products, which contributes to the higher segment mix. Mark Moskowitz - JPMorgan: I want to go back to the commentary on the industrydiscipline as far as inventories. It doesn’t really appear that channelinventories or OEM inventories with respect to hard disk drives has really beenan issue since Maxtor faded away, and clearly WD has had a sterling execution recordin terms of what you guys have done with your business model and yourinventories over the past few years. Are you trying to send a cannonball off the bow to the restof the industry in terms of say, hey, we have a buffer here, don’t mess it upas you go into the first part of next year?

I don’t think there’s any buffers. I think the point I’mtrying to make is that the industry as a whole is leaner going into January andconsequently I don’t expect the same overhang of inventory to affect thedynamics of supply and demand as severely as they have in prior years.

Your next question comes from Keith Bachman – Bank ofMontreal. Keith Bachman – Bankof Montreal: The area of out performance was certainly in the mobileside, as I think Rich was alluding to. Could you talk a little bit more, youmentioned some spot shortages. Why was there so much share gain on the mobileside? Related, where at the spot shortages that you are seeing either at OEM orchannel? Where is the most tightness today?

I think where we are seeing tightness is essentially in midcap range of both mobile and desktop. Ithink our strength in mobile has been the fact that we are leading the marketin terms of volume in the 250GB capacity, where I believe in the last quarterwe shipped more 250GB into the market than any other supplier and I think morethan all other suppliers combined. This week, we announced our 320GB, again, wewill lead on time to volume at that capacity. If you look at the mobilemarketplace, there is a very high demand for high-capacity drives in the mobilespace, 320GB being the largest drive available. Having that capacity in ourportfolio makes us a preferred solution for the customer base. Keith Bachman – Bankof Montreal: Wouldyou expect in the December quarter in terms of your year-over-year growthrates, would be expect that to likewise be certainly the area of outperformance for December and perhaps even March?

We seestrength in the mobile demand. We see mobile growth rates on an industrybasis continuing to outpace other segments. So it’s reasonable to assume that mobilewould be a significant contributor to our guidance of 12 to 15 points ofyear-over-year growth. Keith Bachman – Bankof Montreal: What was the like-for-like ASP changes either sequentiallyyear-over-year?

We covered that. I believe it was --. Keith Bachman – Bankof Montreal: I know what the absolute was, just what was thelike-for-like?

We don’t normally on that.

We don’t give out that information. Keith Bachman – Bankof Montreal: Then the final one from me is, you mentioned that you boughtback some stock this quarter; that surprised me a little bit. Was that pre theKomag deal or taking down the term debt? I’m assuming that the buyback is with the debton your balance sheet that you won’t go after that, but if you could justprovide some color on how you intend to treat the buyback going forward?

Yes, it was pre us drawing down the loan, and in the future,though, we will be opportunistic. We keep our options open on that frontbecause if there are favorable conditions, we may continue to do so.

Your next question comes from Christian Schwab – CraigHallum. Christian Schwab –Craig Hallum: The OEM growth of 34% excluding Komag, tremendous growththere. Is that due more to market share gains or due to the fact that you arecapacity constrained, and you ship to them before you ship to the distributionchannel?

Well, our hard drive growth was 37% year-over-year inrevenues and 29% in unit volume, that was across all segments. It wasn’t an OEMstatement. Christian Schwab –Craig Hallum: Right, I am just looking at your OEM revenue quarter over quarter,sequentially which grew 40%, $900 million minus the $40 million that you threw intoKomag which would make it roughly 34%. The question is do you think you aregaining share at the OEM level?

Yes and the reason, the primary contributor there is if youlook at the desktop it is a roughly 50% OEM, 50% distribution business. Howeverif you look at mobile it is 80% to 90% OEM business. Therefore growth in mobile,a lot of it falls into the OEM bucket. Christian Schwab –Craig Hallum: Perfect. That is the same math I had, just confirming. On thegross margin side the 300 basis point of improvement, what would be a long-termgoal on gross margins should industry conditions remains like are today, stableand well-behaved?

Well, our current long-term range for gross margins is 15%to 20% and that reflects the mix, the maturity of the products and theseasonality. We are early in the media integration timing and that is adefinite cost opportunity for 300 basis points depending on rational competitorbehavior and pricing. We will reach that point at the end of calendar 2008. Soat that stage, we should be able to reflect that change in the margin but it isto earlier at this particular point. Christian Schwab –Craig Hallum: So in essence, longer term should things remain rational, wecan have 20% plus gross margins, correct?

Yes.

Your next question comes from Harry Blount – LehmanBrothers. Harry Blount – LehmanBrothers: I wanted to come back to a couple of questions on thecontribution on both the ASP increase sequentially as well as gross marginssequentially. If you can maybe help us out in thinking about how much of that didcome from mix, how much of that was pricing? How much was other factors such asthe economy on the Komag side?

I would say that on a ranking you find the mix contributedthe most, cost contributed and pricing contributed. Harry Blount – LehmanBrothers: If we take a look at the December quarter and your abilityto blend up, are you constrained on any of the components that will prevent youfrom being able to blend up a similar amount in the December quarter?

We believe we will be able to continue to execute ourmanagement style to optimize our business around any demand profile by havingthe most responsive, most flexible manufacturing and supply chain system in theindustry. So I think we will continue to attempt to best optimize the businessrelative to the sales opportunities that present themselves. Harry Blount – LehmanBrothers: So definitely, you don’t feel like if you had a chance or youneed to blend up your capacity, your platters per drive, you don’t see eitherplatters, heads or suspension being limiting factors at this point?

No. Harry Blount – LehmanBrothers: You do disclose the Komag results separately, could you giveus a sense of what the intra-company eliminations are either on the revenueand/or gross profit line?

We haven’t got that information.

Your next question comes from Shebly Seyrafi – Caris. Shebly Seyrafi –Caris: I just want to make sure I heard you right, did you say thatnet interest income or expense will be $11 million in the December quarter?

Expense. Shebly Seyrafi –Caris: In terms of the ASP change you expect in the Decemberquarter, do you expect it to be flat sequentially or down a few ticks?

It will be flat sequentially. Shebly Seyrafi –Caris: You’re projecting media revenue at $100 million in December.Do you have an idea how that should proceed after the December quarter? Whendoes it go to effectively zero?

We will be without completed or external obligations by theend of March, but we will continue to have some immaterial amounts ofsubstrates going forward after that. Shebly Seyrafi –Caris: Substrates for modeling purposes in June just maybe 5 millionto 10 million or something like that?

Something in that region. Yes. Shebly Seyrafi –Caris: I was surprised you included the in-process R&D chargein your non-GAAP consolidated EPS. I would normally eliminate that and get likea $0.79 number versus your $0.58 number. Tell me why you included that?

Well, we actually just called that out separately to show itas a one-time charge. On an apples-to-apples basis going forward, you areright. The media operations will continue, so it would be the non-GAAP WD HDDplus the media, which would amount to about 178.

We did this because in our guidance, in the refresh callthat we did at the beginning of September when we closed the Komag deal, we hadnot envisaged the IP licensing transaction which is why did the separate columnwith the $60 million. So that you could tie it back to the guidance we hadgiven you for the combined WD Komag activity.

Your next question comes from Aaron Rakers – Wachovia. Aaron Rakers -Wachovia: Building on Shebly’s question here, if you look at yourgross margin guidance for the December quarter and you look at that on astandalone basis, can you help us understand what gross margin excluding theKomag impact would be at the high-end of your long-term guidance range of 15%to 20%?

Well, as we indicated, we’re going to give the amounts on a consolidatedbasis going forward, so the margin indication that we’ve given includes theimpact of the media operation in that number. Aaron Rakers -Wachovia: Is it fair to assume that obviously given the accretiveimpact that still is going to be a negative impact on the gross margin line, isthat fair?

Well, I think if you look at the current situation and lookat what we provided as the addendum for those three weeks, it would be fair toassume if you look at that just maybe quarterize that as John indicated. We’regoing through the transition whereby we are providing product externally, andthen we’ll be tapering down in the January quarter and completely out at theend of March other than for the substrate. Aaron Rakers -Wachovia: I’m interested in the comments looking out now into Marchquarter, and one of the areas of notable strength was on the OEM side ofbusiness. Have you seen a change with regard to OEM order patterns in thenotebook market in particular, given the recent, I think one of your peers explicitlystated that they were not able to meet all of their demand. Have you seen alengthening in terms of the OEM forecast that you guys are receiving and that’swhat is giving you better visibility?

I’ve been addressing this I think in the last few calls. Asthe industry has consolidated and as only a few people have been generating thenecessary revenues -- well, not revenues, generating the necessaryprofitability -- to be able to reinvest in significant technology and productbreadth and in capacity, I think customers are beginning to understand whatthat means strategically and are beginning to view hard drive availability as asignificant enabler of their businesses, and are taking appropriate actions toensure that they have that availability. So, yes, we’re seeing a much more realistic view emergingthan perhaps in years gone by when it was an assumption that there was going tobe access available at any time. Aaron Rakers -Wachovia: Cash flow generation had a pretty solid quarter, but once webake in a full quarter of Komag, maybe you could help us understand how weshould think about quarterly cash flow generation? Last question for me would be, a couple of quarters ago youhad talked about moving into adjacent market opportunities, any update withregard to that in terms of new product segments that you might go after? Thankyou.

On the cash flow, we anticipate that the free cash flow forthe current quarter will be around $100 million.

On growth and adjacent markets, we continue to invest inbreadth of product and we continue to a value opportunity in segments in whichwe don’t participate whether they be hard drives or other solutions to storagedemand, and as we evaluate those markets and our potential to make a significantreturn and leverage our core engineering capability, then those things that passthe standards we will act on them, but as you know we only announce productsand product families when we’re shipping.

Your next question comes from Jeff Brickman – UBS. Jeff Brickman – UBS: DVR growth was very solid in the quarter. Is this a functionof the customer preferring [inaudible] hit in the quarter and should we expectthe line to continue to be lumpy going forward?

Yes I think so. The DVR business is very much a projectdriven business, the demand is very concentrated in large customers such as thecable companies and the direct satellite TV companies. So it tends to be lumpybut some very positive traction, some very good plans in the offering relativeto the transition to HD, all of which is good for storage. On the mid tolong-term basis, I see this as a very solid application for our technology.

Your next question comes from Joel Inman – Robert W. Baird. Joel Inman – RobertW. Baird: You have had a lot of success in retail driving that as ahigh percentage of your business. Can you give us a sense of where you thinkthat could go in terms of mix and the dynamics between share gain and marketgrowth?

I think the branded segment continues to be a significantgrowth opportunity for the industry; we’re seeing that the driver of thatgrowth is all of the non-computing content that people now are generating,whether it is with digital cameras or a collection of audio or video content. Thisis a whole new market application. Ithink consumers are becoming educated about the value and the need for backupstorage, they are also becoming very mobile in terms of seeking the means tocarry their data memories and photos with them wherever they go; all of thesethings are very positive for that space. So I think we’ll continue to growthere. Our timing, our product design, our product feature set, ourreputation for quality and reliability, our relationships with the channel inboth retail and direct marketing seem all very positive and all of that acrossthe board has contributed to our success with the My Book and Passport brands.We would certainly hope to continue that and we have a very high focus onensuring that we do. Joel Inman – RobertW. Baird: But do you see it being 40% of your mix at some point?

I think we’ve made the major strides, I think theopportunity for us is to, in the developed markets, to grow with the marketdemand and in some emerging markets which really don’t buy these kinds ofproducts today, the emerging market tends to be very much a do-it-yourselfmarket in the very early days. As average incomes rise then people begin to buythe complete branded finished solution. So emerging markets offer a significantopportunity in the years to come.

Your next question comes from Andrew Neff – Bear Stearns. Andrew Neff – BearStearns: I just want to go back to something, as you let the customersknow that you’re in allocation, how do you avoid or measure or factor in doubleordering? There has to be that going on, because they all know the shortagesand they need get what they want. Can you talk about any pricing trend changes in the notebookarea?

Let me address the orders first. We have a very high degreeof visibility on inventory levels throughout the channel. Therefore, we canjudge and base allocation on replenishment of inventory levels to what webelieve is appropriate. In the OEM space, if you look at the large OEM companies,they run very similar models to ourselves; very tight asset turn models. Therefore,we see what’s in the hubs, we see what’s being pulled. We see reporting of whattheir shipments are. I’m not concerned on lack of visibility of true demand. On pricing in mobile, I mean it continues to be competitive. Andrew Neff – BearStearns: Are you in allocation mostly in mobile as well, or is itmostly in the other areas?

As I mentioned, mid-cap in both 2.5 inch and 3.5 inch, we’re seeing tightness inthe market.

I would now like to turn the call over to Mr. John Coyne.

Well thank you everyone for participating in today’s call. Ilook forward to updating you on our progress in the months and years ahead.Thank you.