Glen Yeung - Citigroup John Lau - Jefferies Adam Parker - Sanford Bernstein Cody Acree - Stifel Nicolaus Michael Masdea - Credit Suisse Nimal Vallipuram - Hapoalim Securities David Wu - Global Crown Capital Chris Caso - Friedman, Billings Chris Danely – JP Morgan Jim Covello - Goldman Sachs Tim Luke - Lehman Brothers David Wong - A.G. Edwards Dan Jenkins - State of Wisconsin Investment Board Michael McConnell - Pacific Crest Securities Charlie Glavin - Needham & Company Allan Mishan - CIBC World Markets Mark Edelstone - Morgan Stanley Joseph Osha - Merrill Lynch

Good afternoon. Thank you for joining our second quarter earnings conference call. Kevin March, TI's Chief Financial Officer, is with me today. For any of you who missed the release, you can find it on our website at ti.com/ir. This call is being broadcast live over the web and can be accessed through TI's website. A replay will be available through the web. This call will include forward-looking statements that involve risk factors that could cause TI's results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the earnings release published today, as well as TI's most recent SEC filings for a complete description. Our mid-quarter update to our outlook is scheduled this quarter for September 11th. We expect to narrow or adjust the revenue and earnings guidance ranges as appropriate with this update. We will observe a quiet period beginning on September 1st until the update. In today's call, I will review our highlights of revenue performance and then Kevin will discuss profit performance and the third quarter outlook. We will keep our remarks short, saving time for us to respond to your questions. In this call, all of our financial results will be described for continuing operations, including historical comparisons, unless otherwise indicated. The Sensors and Controls business was divested on April 27th and is reported as a discontinued operation. Second quarter TI revenue of $3.7 billion was up 11% from the first quarter and grew 24% from a year ago. This was in the middle of our updated range of expectations that we issued in June and in the upper part of the original range that we issued in April. Semiconductor revenue was up 7% sequentially and up 26% from a year ago. This was the fourth consecutive quarter of accelerated year-on-year growth for semiconductor. Semiconductor revenue benefited from the royalty settlement with Conexant that we discussed at mid-quarter update and that was included in our updated guidance. Recall that this was a $70 million cash payment that was received in the quarter. Educational and Productivity Solutions revenue grew $118 million, or 160% sequentially, due to seasonal demand for graphing calculators as retailers began to stock for the upcoming back-to-school season. E&PS revenue grew 6% from a year ago due to higher demand from instructional dealers that supply school districts. Driving the semiconductor results was continued strong demand for analog and DSP. Analog revenue grew 8% sequentially, primarily due to demand for TI's high-performance analog products, which grew 5%, as well as demand for analog products used in broadband applications. Analog revenue was up 23% from a year ago, primarily due to high-performance analog growth of 32%. DSP revenue was about even with the first-quarter level and was up 24% from the year-ago quarter due to demand from the wireless market. Turning to wireless, our results from the second quarter continued to be strong. Revenue from wireless products in the second quarter was up 4% sequentially and up 27% from the year-ago quarter. 3G revenue continued to set the pace and was up over 70% from a year ago. We believe we are continuing to gain share in WCDMA modems, further extending the leadership position that we already hold. In fact, our WCDMA digital base-band unit shipments were up 44% over the first quarter. Overall, the wireless end market is developing consistent with our expectations. In addition, we are especially encouraged by a couple of key happenings during the second quarter that pertain to wireless. First, the continued healthy growth in the wireless market points to the increasing importance of this market as a driver for the semiconductor industry overall. Second, there was solid reinforcement in the quarter for TI's strategy to focus on open standards as operators around the world continue to adopt GSM. A recently published report said that 25 CDMA operators are now using or planning to use the GSM standard. According to the report, several of these operators have said they will shut down their CDMA networks in favor of GSM. These operators that are availing themselves and their consumers of the scale advantages that GSM, with over 80% of the world subscribers today, provides. As the leading chip vendor for GSM, we expect to benefit accordingly. In fact, we are preparing to help accelerate this transition, particularly in the emerging markets where market demand is highly sensitive to handset price. In the second-half of this year, we will begin production of our single-chip cell phone solution. We expect single-chip architectures to be quickly adopted across a range of handsets and standards, due to their cost efficiency and performance attributes. TI is the early leader here. Considering the cost advantages that we can provide our customers with this architecture and the royalty burden inherent in CDMA, we believe the GSM market will maintain healthy growth in the years ahead. Finally, in DLP products, revenue increased 15% sequentially, and grew 34% from a year ago. HDTV products were the biggest factor in the sequential growth, although products for front projectors also contributed strongly to the growth from a year ago. At this point, I will ask Kevin to review profitability and our outlook.

Thanks, Ron, and good afternoon, everyone. Let me start by breaking out the details of the royalty settlement and the sales tax refund from the State of Texas that we received in the second quarter. Both of these items were discussed at the mid-quarter update and their financial impact to our continuing operations was as we had expected at that point. First, the royalty settlement was a $70 million cash payment to TI. Similar to other royalties, this was included in semiconductor revenue in the quarter. In this case, there was a $10 million cost of revenue associated with an agreement we have with Stanford University on some of this intellectual property. The operating profit and profit before tax impact was $60 million in the second quarter. As a related note, this profit impact does not include the current or past legal expenses incurred in recovering this royalty settlement. Next, the benefit of the sales tax refund was a total of $77 million. This was a favorable result from our negotiations with the State of Texas over sales taxes that we had paid on various purchases over a nine-year period. The benefit is broken up as follows: it reduced cost of revenue by $31 million; R&D by $21 million; and SG&A by $5 million; and it increased other income and expense by $20 million. TI's second quarter gross profit from continuing operations was $1.91 billion and gross margin was 51.6% of revenue. Gross profit increased $235 million from the first quarter, with $91 million of the increase associated with the royalty settlement and sales tax refund and the remainder primarily associated with higher revenue. Outside of the royalty settlement with Conexant, royalties declined as we had expected in the quarter due to the expiration of certain cross-license agreements. These royalties were in the range of $60 million to $70 million in the second quarter and we believe this represents the bottom for this decline. We have renegotiated and signed some agreements and others currently are under negotiation. We do not have any other significant expirations in the near term. Operating expenses were even with the first quarter. Outside of a $26 million benefit from the sales tax refund, operating expenses increased due to higher semiconductor product development, especially in wireless. TI's operating profit for the quarter was $953 million or 25.8% of revenue. This includes a total benefit of $117 million associated with the royalty settlement and sales tax refund. Without these items, operating margin would have been 23% of revenue. Operating profit also includes stock-based compensation expense of $84 million, or 2.3% of revenue. Other income and expense was $88 million, up $36 million sequentially due to the sales tax refund and higher interest income, which reflected our increased cash position. Income from continuing operations was $739 million, or $0.47 per share. It might help if I summarized the second quarter's earnings per share transition from the $0.33 that our continuing operations produced in the first quarter: I will leave most of the cash flow and balance sheet items for to you review in the release. Let me make just a few comments. Cash flow from operations was $667 million in the quarter and we ended the quarter with $5.67 billion in total cash. Our cash position was positively affected not only by our strong operational results but also by the $2.98 billion we received from the sale of the Sensors and Controls business. These were partially offset by our stock repurchases. In the second quarter, we used $1.04 billion of cash during the quarter to repurchase 33 million shares of TI common stock. In the quarter, 275 million of variable-rate bank notes were also prepaid. Inventory of $1.34 billion at the end of the second quarter increased $89 million as we prepared for expected higher shipments in the second-half of the year. Days of inventory at the end of the second quarter were 67, the same as the first quarter level. TI orders in the second quarter were $3.91 billion, an increase of 8% sequentially. Semiconductor orders were up 10% sequentially. As a result, we continue to build backlog in the quarter with a semiconductor book-to-bill ratio at 1.07, up from 1.05 in the first quarter. Turning to our outlook for the third quarter, we currently expect total revenue from continuing operations to be in the range of $3.63 billion to $3.95 billion; semiconductor revenue should be in the range of $3.45 billion to $3.75 billion; and E&PS should be in the range of $180 million to $200 million. Earnings per share from continuing operations are expected to be in the range of $0.42 to $0.48 in the second quarter. In summary, TI is well-positioned for market opportunities that continue to exhibit long-term growth potential; near-term, customer demand trends remain positive; our backlog is strong; and we expect seasonal growth in the third quarter. We will continue to pay close attention to the economic environment as well as inventory trends at our customers and in our channels. As these indicators reflect change, either up or down, we will respond accordingly. With that, let me turn it back to Ron.

Thanks, Kevin. At this time, I will ask the Operator to open the lines up for your questions. In order to provide as many of you as possible an opportunity to ask your questions, please limit yourself to a single question. After our response, we will provide you an opportunity for an additional follow-up. Operator.

(Operator Instructions) The first question comes from Glen Yeung from Citigroup. Please go ahead. Glen Yeung - Citigroup: Thank you. This may sound like a bizarre question in this economic environment, but given the fact that your orders are up, your backlog is up, how do you characterize your visibility here? Do you actually think it is better than it was at the end of first quarter?

Glen, that is exactly how we characterize it. We had the book-to-bill at 1.07, which was actually stronger than 1.05 we saw in the first quarter. As we looked at the pattern of orders that came in, our customers are actually putting orders on us that extended a bit further out in the future than what we have seen in recent quarters. I would concur with your observation -- it is better visibility than we have seen recently.

Glen, I would just say as it leads into third quarter, we are coming into third quarter with what I would characterize as a very strong backlog coverage of our expected revenue. Glen Yeung - Citigroup: For either of you, in the wireless business unto itself, is what you are seeing more a function of end market relative strength, or do you think there is some new product build, new model build, that is contributing to the relative strength as well in the third quarter?

Probably combinations. I would say certainly the end market remains strong. I think analyst numbers that I have seen have shown handset unit growth, second quarter versus year-ago, something like at the 26% level. So clearly that is a healthy market, but I think the other benefit that TI experiences is that if you look at who our major customers are, they are the players that seem to be gaining share. For example, Nokia, Motorola, Sony Ericsson, I think all three of those players reported revenue growth for their handset business in the most recent quarter up over 20%. I think two of them were up over 40%. So a combination of a strong market and customers that are doing well, and then finally, as you said, products. Certainly 3G, for us being up 70% from a year ago, is a technology trend and a consumer appetite that we are benefiting from as well. Glen Yeung - Citigroup: And LoCosto too. Thank you.

Thank you, Glen. Next caller, please.

The next question come from John Lau from Jefferies. Please go ahead. John Lau - Jefferies & Co.: Just circling back on the wireless concerns, there has been so much consternation about the inventory buildup. Ron, correct me if I am wrong, you are in a hub arrangement. Can you characterize what you are seeing there? It seems like you probably have the best reaction time and visibility right now to what the inventory levels are for these wireless handsets. I was hoping you could settle that concern once and for all.

Certainly where we are managing the hubs with the largest wireless customers, those inventories are well-behaved and where we want them to be and where the customer wants them to be. We do not have that perfect visibility at all customers and not even all wireless customers, especially when you move down to some of the smaller players, but I would say in general we are not aware of wireless inventory issues that are out there. Probably the one exception that we would identify would be in Japan, where that operator actually built ahead inventory. They did it proactively during the first-half of this year in order to help motivate a subscriber transition over to 3G before they face a number of portability that kicks in this fall. That would probably be the one area where some inventory has built and first-half of this year would be above what we would characterize as a sustained run-rate. But that is a situation that I would say we understand and there was a strategy behind. John Lau - Jefferies & Co.: Ron, in terms of the pull-through and the signals that you have, there is nothing unusual or changed in that manner?

Well, in second quarter there is a lot of noise, even within the investor community about different customers and handset manufacturers shifting around, for example, low-end demand. We did see some of that. Most of it was what I would characterize as in-quarter adjustments to their demand. I guess the other thing I would say is we do not believe those changes -- first of all, they are normal. They happen all the time. We also do not believe they are reflective of changes in underlying consumer demand but rather they were rationalization of those particular OEM market share aspirations. I do not want to sit here and say we did not see any change but they were understood and they were certainly inside the guidance that we were giving, even in the first of June. John Lau - Jefferies & Co.: That clears it up. Thank you very much, Ron.

All right, John. Thank you. Next caller, please.

The next question comes from Adam Parker from Sanford Bernstein. Please go ahead. Adam Parker - Sanford C. Bernstein & Company, Inc.: A couple of questions, I will try to be fast. Firstly, your incremental gross margins were a little bit weaker than I had expected, given your depreciation boost and the royalty and the tax. It looks like they were only about 39% sequentially. Any moving factors in the quarter on gross margins? I know you do not like to talk about them quarter over quarter, but was there something happening that moved around your gross margins mix or something in the quarter here?

Adam, you are talking about the semiconductor fall-through when you are quoting that number? Adam Parker - Sanford C. Bernstein & Company, Inc.: Yes, either way. I know you have the big build in Q2 but clearly, even at the corporate level, you did not get the drop-through that you got in some of the previous quarters.

Right. We got an absolute drop-through of 65% but you have correctly done the math and you pulled out the one-time benefits that we had, and that works out to about 38%, 39% fall-through. You put it well. There is a lot of noise that always happens inside of a quarter-over-quarter basis, which is why we prefer to look on a year-over-year basis, because we think it tells you a lot more. You do that same math, and it is 62% on a year-over-year basis. However, there was one fairly large moving part inside the quarter that I alluded to in my opening comments a few minutes ago, and that was having to do with royalties. We are now down to in the quarter, about a $60 million to $70 million kind of quarter on royalties versus you recall a year ago, we ran about $100 million a quarter, give or take a little bit. That has worked its way through the quarter. That certainly was a transition impact in the second quarter. It was not unexpected; it was inside our expectations but that clearly was a drag on those margins. Adam Parker - Sanford C. Bernstein & Company, Inc.: So sequentially, royalties were down $40 million? Is that what you said?

No, they are probably down about $20 million during the quarter. Adam Parker - Sanford C. Bernstein & Company, Inc.: Okay, but that would not explain the whole delta. Is there anything else, or is this kind of factory and a lot of moving parts -- anything else you can give there?

I would give you more of a lot of moving parts on that. That gets you to about -- when you adjust for that royalty, that fall-through sequentially, it computes to more like about 50%.

Adam, I would just add it is this kind of noise is why we do not. If you go back to first quarter, our semiconductor incremental gross margin was something like 300%. If you try to compute incremental margin off of what we have given you in terms of guidance for third quarter, you will see a relatively high number in third quarter as well. Adam Parker - Sanford C. Bernstein & Company, Inc.: Right, it should be well above what you just did here.

I think that would be a reasonable assumption. Adam Parker - Sanford C. Bernstein & Company, Inc.: All right. Second question is, if your visibility is a bit better, as somebody said early and your semi orders are up, then why is the guidance only up 2.5 or whatever sequentially? Did lead times extend here and you are betting cancellations, or is there a normal seasonal slowdown in turns? Can you just give a little bit more color on the disconnect between your better visibility and the guidance?

I think what you need to adjust for is the $70 million royalty settlement in the second quarter. If you back that out, the sequential growth probably looks more consistent with what you would expect. In fact, I think for semiconductors, it is something like a range of 0% to 9% sequentially going into the third quarter, if you have adjusted for that settlement [payment]. Adam Parker - Sanford C. Bernstein & Company, Inc.: That makes sense. Lastly, I do not know if you do this on purpose or not, but you did not mention the 3G sequential growth. Can you just remind me what that was? I know you said the year-over-year number was 70. What is the sequential growth in 3G, Ron?

We do not break it out every quarter, in all of its dimensions but clearly with 44% modem unit growth quarter by quarter, you can assume it grew and was a solid contributor to the sequential growth as well. Adam Parker - Sanford C. Bernstein & Company, Inc.: Why the opaqueness here?

Actually, the focus we want to provide was on the year-on-year growth rate. I thought the unit growth would be beneficial because I noticed last week, one of our major competitors provided their unit growth sequentially. I just provided that number for a direct comparison. Adam Parker - Sanford C. Bernstein & Company, Inc.: One last thing, sorry -- what do you expect to happen to your inventory in the third quarter in dollar terms? Do you expect to build it again or would you expect to draw some down on your own balance sheet in Q3? Thank you.

Of course, as you well know, we do not forecast inventory growth per se. It is going to be a function of what we believe our revenue outlook is going to be for the future. We are also going to be continuing to take advantage of trying to use any of our critical capacity for opportunistic build ahead. That is, some of those lines that have been tight for the last few quarters, as they begin to open up we are going to go ahead and try to continue to use those to build some inventory, so as not to get behind on those lines and the products that come off those lines in the future.

Okay, Adam, thank you and let's move to the next caller, please.

The next question comes from Cody Acree from Stifel Nicolaus. Please go ahead. Cody Acree - Stifel Nicolaus: I know you cannot give a lot of detail as to specifics, but can you give a directional, at least your view, of some of the end markets for the third quarter and what goes into your guidance?

I do not think we want to try to break our guidance down specifically by end market. We are probably more comfortable talking about that from the standpoint of second quarter. In terms of forward-looking, we would prefer not to break it down like that. Cody Acree - Stifel Nicolaus: You said that visibility is that much better; are there any sectors you feel more comfortable with versus others?

I would probably leave it the same response, that we really do not want to provide those forward-looking views. Cody Acree - Stifel Nicolaus: Let me try it another way then. The 0% to 9% sequential growth you talked about for the semis, what would have to happen to get to the low-end of that range, for that 0% to happen? It sounds like things are actually fairly stable from your end markets or from your visibility. What has to happen to get to that 0%?

You can always have negative factors come along, whether it is driven by a macro environment, and certainly there is a lot of noise out there -- between Middle East conflict, and rising interest rates, and uncertainty about what the Fed will do, and investors expectations about what the Fed will do -- if that created a change in consumer behavior and buying patterns, certainly that could drive us toward the low-end of that range. Cody Acree - Stifel Nicolaus: Lastly, when you guys are sitting around and looking at preparing for this conference call and looking at what the guidance is going to be, obviously now we have had a lot of semiconductor and technology of earnings reports, what do you see as the disconnect out there, where you are giving us a pretty strong view, we are seeing a lot of companies out there pointing towards not just wireless but just generally inventories in the channel, maybe a little more lethargy than demand -- there is definitely a disconnect between what you are seeing and what maybe the broader market is seeing. Can you help us out there a little bit?

I will offer a few comments and then, of course, Ron can add some other color. I think one of the things we need to keep reminding ourselves of is TI is really quite well-positioned -- in fact, I would even point out uniquely-positioned -- in some very essential strong-growing markets. Clearly the wireless market, both the high-end and the low-end, infrastructure, the fact that many more operators are going to GSM is all very, very good news for our overall wireless position. Clearly our high-performance analog business continues to do very well, up 32% on a year-over-year basis, 5% on a quarterly basis. Then DLP, you know, we are uniquely positioned to take advantage of some of the high-definition TV and the growing market for front projectors with our DLP technology. In the case of DLP, up 34%. Really, it is a function of both the products that we offer in DSP and analog, and also the markets that those products are selling into, that make us unique versus many of the other people that you are comparing us against, or people are comparing us against today.

I would just add that when you think about the semiconductor industry overall, so much of that comparison is weighted down these days by what is going on with the PC. I will remind you, our exposure to the PC these days is less than 10% of our semiconductor revenue tied directly to the PC. Not only do areas like wireless and high-performance analog and high-definition TV and projectors, not only do they drive a good second quarter but I think those are long-term trends that, frankly, the contrast just gets starker in the years ahead. Cody Acree - Stifel Nicolaus: Excellent. Just one clarification; you mentioned the single chip revenue, the wireless single chip, LoCosto. When do you expect to have that into real volume revenue?

The second half of this year is when we will ramp volume on that. Cody Acree - Stifel Nicolaus: And on the shelves?

In the second half of this year as well. Cody Acree - Stifel Nicolaus: On the shelves?

Right. Just in case the other people did not hear your question specifically, since I was talking over you, the second-half of this year is when we will ramp production and when we expect to have manufacturers with product on the marketplace as well, based upon that single chip product. Thank you, Cody. We will move on to the next caller, please.

The next question comes from Michael Masdea from Credit Suisse. Please go ahead. Michael Masdea - Credit Suisse First Boston: Thank you. DSP, given the strength you saw on some of the modem business and wireless you talked about, it was flat overall. Were there some moving parts that pulled it down a little bit?

Actually, there are a couple things we can point to in DSP. First of all, I assume you're talking about from a sequential standpoint, where that revenue was flat compared to wireless being up 4%? Michael Masdea - Credit Suisse First Boston: Yes.

The com’s infrastructure build-up we had was one item.

Yes. You will recall last quarter, we talked about strength in com’s infrastructure -- that includes both Internet-type of equipment as well as wireless infrastructure. Sequentially, wireless infrastructure was up. The other part of the com’s infrastructure, more the Internet-type equipment, was down sequentially. As we dug into that, that really was specific to in the first quarter, one of our large customers there -- actually, what became a large customer; it was a customer that previously was using a competitor's product that was in the process of transitioning to TI. Basically, they brought in inventory and did a bit of a channel fill as they were making that transition. That is probably the most notable cross-current that I can think of, and that was really more of a first-quarter effect. The second quarter is probably more reflecting the ongoing run-rate for that piece of the business. Michael Masdea - Credit Suisse First Boston: When you say Internet equipment, you do not mean broadband, do you? You mean more infrastructure?

Infrastructure, infrastructure, and specifically high-density voice type of equipment. Michael Masdea - Credit Suisse First Boston: Great. You made a comment about some of your customers extending their lead time, or their visibility on you. Are you implying that lead time stretched out a little bit? Then, if you could also talk around what is your approach toward lead times right now? Do you still keep them lean or you are not able to control them? What is going on there?

I think even at the mid-quarter update, we were talking about in some of the standard product areas, including some of the high-performance analog products, just because ongoing demand had remained so strong, we did move some of the lead times out probably 1 to 2 week types of extension. Customers just realize the environment is running pretty strong and availability is certainly not what I would call excessive, and so they are giving us additional visibility just to help from a planning purpose and to help ensure their supply going forward. Michael Masdea - Credit Suisse First Boston: Just to follow up real quick, do you feel the necessity, given everybody is so worried about everything in the macro, et cetera, to scrub those down a little bit in this environment or are you just trying to assume that these customers have a really good grasp on their business right now?

We do a little bit of both. For example, with distributors we literally go through and match up their demands on us with their customers' demands on their product to make sure that what they are trying to do from an inventory standpoint and orders they placed on us make sense. With the broader customer base, it is probably a little more difficult to do that, given the diversity of customers that we are playing with. We certainly try to do it to our best extent but I will readily admit that is not going to be perfect. Michael Masdea - Credit Suisse First Boston: Thank you.

Thank you, Michael. Next caller, please.

The next question comes from Nimal Vallipuram - Hapoalim Securities. Please go ahead. Nimal Vallipuram - Hapoalim Securities: Two questions here; number one is if you look at the wireless business in the second quarter, you said you were up about 4% from first quarter. Is that sequential growth when you compare it historically? Is it in line, higher than expected or lower than expected? I have a follow-up question on that.

It is in line on all of those perspectives. If you look at, it is pretty much right in there with the normal, what I would call average growth. I think we measured, over the last 8 years, I think it is right in that 4% to 5%. I would say it is actually strong if you consider that first quarter, our wireless sequential growth was roughly flat where the normal seasonal first quarter would be down about 5%. Second quarter was normal seasonal growth on what I would call a tougher compare. Nimal Vallipuram - Hapoalim Securities: Just to follow-up on that, I am trying to do the same thing the other analysts were trying to do in the last half-an-hour. Is it possible that the first-half of the year, for whatever the reason, the orders from the up-stream customers, so-called component suppliers, were pulled in by the customers? I am not sure why that happened, but is there a possibility that happened in the first-half? Did you get any indication of that?

I am sorry, you are saying pulled into the first-half from the second-half? Is that what you are saying? Nimal Vallipuram - Hapoalim Securities: Yes.

I do not know that answer. There is always that possibility. I do not believe we think that was extensive, with the exception of, as I said, the FOMA handsets in Japan where we knew they did a build-ahead. Nimal Vallipuram - Hapoalim Securities: Just a final question; on the business, excluding DSP and the analog, it grew 17% quarter over quarter, am I right?

Yes, that grew 17%. Nimal Vallipuram - Hapoalim Securities: Kevin, can you give us some details as to what part of the business grew? That sounds like higher-than-expected growth from non-DSP and non-MSP business. Was there a one-time surge in orders for some product?

Inside that “other” is the Conexant royalty that we had mentioned, so when you back that out, it really only grew about 8% quarter over quarter, so much more where you would expect. Nimal Vallipuram - Hapoalim Securities: Is that 8% as expected for that business?

Yes, and what you will see inside that, that is where you see DLP, which of course is up 15% quarter over quarter. Ron mentioned during the mid-quarter update we were seeing strength in some of the microcontroller space, such our MSP430 family, and so on. We saw those kinds of things happen with the smaller business units. Nimal Vallipuram - Hapoalim Securities: All right. Thank you, Kevin. Thanks for the time, Ron.

Thank you, Nimal. Next caller, please.

The next question comes from David Wu from Global Crown Capital. Please go ahead. David Wu - Global Crown Capital: Ron, can you give us an idea about the lead times currently that stands on order standard products, especially the high-performance analog part? The other thing I was curious about is the broad range of customers you have obviously have not been paying much attention to CNBC news every day. What do you suspect the optimism is based on?

I'm sorry, you're talking about -- ? David Wu - Global Crown Capital: The lead times on standard products, particularly the high-performance analog; where do these stand currently?

I don't have a full-up listing, and again, keep in mind we have 15,000 different high-performance analog products. I believe those lead times are generally in the eight to nine week type of range. Probably, we'd characterized them more previously being six, seven, eight weeks, somewhere in that range. To what do we attribute -- ? David Wu - Global Crown Capital: The customers' optimism, other than not watching CNBC television every single day?

Well, I mean, take our biggest business, wireless and I read our major customers' conference call transcripts from the last week, and it seemed like all of them are pretty clear about what's driving their business. It's areas like 3G adoption and market share gains in that space and low-price handsets in emerging markets like India and South America and Africa and Southeast Asia all driving a lot of growth in that space. Once again, our customer base tends to be the big players in that space. Finally, most of these customers are focused on the GSM space. I think there's a lot of excitement, enthusiasm that there's even higher incremental opportunity when you consider more and more of these CDMA operators are expressing their interest in shifting to GSM as well. So, pretty much when you go down the list of things that's driving their success -- and therefore, driving TI's success -- it's pretty extensive and it's positive. David Wu - Global Crown Capital: Actually, Ron, I was thinking about the broader customers, the smaller ones; not the Nokia’s and the Motorola’s of the world. Those are the people that have given you longer lead orders, right? Is that a function of your standard products lead time going out?

As I said, in some what I characterize as more isolated areas, we've pushed orders out. But I think again, you have to be a little careful that when they give us more extended visibility, that's not necessarily because of optimism. That's because they want to ensure supply. So it's just giving their supplier in this case additional extended visibility. The other thing I would say, by the way, is our backlog, by far most of it, almost all of it is still inside 90 days. So that 90-day window is what I would describe as well within their horizon to be able to forecast. We're not pushing their limits there in terms of forecasting their business. David Wu - Global Crown Capital: Thank you.

Thank you, David. And let's move to the next caller.

The next question comes from Chris Caso from Friedman, Billings. Please go ahead. Chris Caso - Friedman, Billings: Yes, hi. Thanks. Just a follow-on to something you said earlier. If you could talk about how your visibility normally changes as you go through the third quarter? In other words, when are your customers typically firming up orders for the seasonal build? What are the potential time horizons, when they could either expedite orders or reduce the forecast as you go forward in the third quarter? What's typical, seasonally, for you guys?

Chris, I don't know if there's really a seasonal answer, per sae, on that. It's more a question of availability and their perception of what their overall demand levels are. As Ron indicated, we are seeing where in some areas, they've given us a little bit more visibility into the future. But for the most part, the kind of orders that we're seeing are broad-based. They're across our portfolio and across the markets that we're in and are probably consistent with the fact that our customers are feeling reasonably confident of what their outlook is. I think you're asking what their cancellation numbers are. Again, that's going to vary, custom products versus catalog products, with a variation inside that. We haven't changed those, and I don't see where we're going to be changing those any time in the future. We constantly have cancellations and reschedules every quarter. We had them last quarter, the quarter before, I expect we'll have them in the third quarter. But again, what we're sharing with you right now is that everything that we see at this point says that we should expect a solid quarter in the third quarter based upon the backlog we come into the quarter with.

Chris, the other thing I would add just in terms of their ability to upside as they get closer to the holiday period, it will vary by product, but typically our manufacturing cycle times -- not lead times necessarily, but manufacturing cycle time 0-- will run probably 10 to 12 weeks on up to 16 weeks for the more advanced products. But we also try to anticipate where we might have call it, customer upside potential, and get appropriately positioned from an inventory standpoint. For example, high-performance analog, we've talked previously about die bank strategy and things like that, that allow us to shorten the ultimate lead time and our ability to respond to customer demand. So areas like that is where we will try to continue to position inventory to be able to be flexible to those customer upside requests. Did you have a follow-on, Chris? Chris Caso - Friedman, Billings: Yes, just as a follow-on to that, could you talk about what you expect in terms of linearity? Maybe you could talk to both revenue from the orders that you do see already, as well as when you expect to see the stronger bookings for the holiday season? In other words, when customers want shipments to ship for the holidays, does it typically come in the August/September timeframe?

Yes, from a revenue standpoint, I won't describe our expectations for linearity, but just historically, third quarter has run similar to most other quarters, where the last month in the quarter is the strongest from a revenue or from a shipping standpoint. Certainly, that makes sense in the case of third quarter because September is when we're shipping product that customers will be putting into their own lines for holiday-related sales. From an order standpoint, what I can just say is we probably have lead times that range anywhere from in general, eight weeks to 16 weeks. So that would give you a feel for when they need to be putting backlog in place to support holiday shipments. Chris, thank you. Let's move to the next caller, please.

The next question comes from Chris Danely from JP Morgan. Please go ahead. Chris Danely - JP Morgan: Thanks, guys. Did the internal utilization rates change much in the quarter? Where do you expect those to go going forward?

Chris, we haven't been breaking out or publicly describing our internal utilization rates for some time now. But I would just say that we continue to use foundries for advanced lithography, and we do that because our internal advanced lithography utilization rates are very, very high. In fact, essentially fully-loaded. In our other areas, we have some areas where we're very highly utilized and some areas where we're not as highly utilized that we still have open capacity to support our revenue growth plans.

Chris, we don't give the absolute number, but sequentially utilization was up in second quarter versus first quarter. Chris Danely - JP Morgan: Okay, great. Where can we expect margins to trend over the next couple of quarters? Any chance of throwing out some sort of new peak gross margin number?

Well, we appreciate the opportunity to throw out a new one, but I think that we'll forego that one at the moment. We have been pretty disciplined in trying to forecast just our revenue line and our earnings per share line and not the lines in between. But I would remind you of a few things that you could take a look at and expect as you look at both our gross and our operating margins as we move into the future. One, of course, is the year-over-year depreciation decline that we've been talking about already, that we have from the last year into this year. The other, and perhaps very important, is the mix change that we're beginning to see over time. As we get move of our revenue coming out of the high-performance analog and DLP space, for example, that helps to increase the overall mix of our margins. The other is, as I mentioned, we continue to have capacity and investing capacity, and that allows us to go off and grow revenue with some nice fall-through on that. So we've got a few things that continue to give us quite a bit of comfort that we can continue to improve our margins in good markets over time. I would just remind you that one other headwind that we've got for 2006 versus 2005, for example, is in 2006, we'll have a full year worth of stock option expensing, where in 2005 we only had a half-year worth of stock option expensing. Chris Danely - JP Morgan: Got it. Did you guys give out the sell-in versus sell-through?

You mean specific numbers? Chris Danely - JP Morgan: Just relatively, yes.

Yes, well, from a relative standpoint, what I can say is that re-sales grew at about the same rate as TI's overall semiconductor growth rate, while our revenue growth from shipments into distributors was less than that rate. So, re-sales up more than shipments into distribution. Chris Danely - JP Morgan: Okay. Thanks, guys.

Thank you, Chris. Next caller, please.

The next question comes from Jim Covello from Goldman Sachs. Please go ahead. Jim Covello - Goldman Sachs: Hi, guys. Thanks, so much. A couple quick questions. Just going all the way back to Cody's question. Specific to the wireless business, I think it's some of the other wireless customers that have guided down or said that they were going to proactively take inventory, whether it's their own or their channel inventories down. Kevin's comments seem to suggest that you guys just don't think that's going to be necessary. I mean, do you think there will be a period when your inventories have to come down? I mean, the reason I ask is because you made it seem like your business is less cyclical this time. Were you implying that?

No, Jim, I didn't forecast what direction inventory was going. I think the way I answered that is our inventory will change in accordance with our outlook for revenue. So to the extent that we expect that revenue growth, we will grow inventory to support it; and if we expect revenue to decline, then we'll adjust inventory accordingly. Jim Covello - Goldman Sachs: Sure. But relative to the point: some of your competitors, again, specific to wireless, are taking a more proactive approach to bringing that inventory down either on the channel or on their own balance sheet. But you rightly suggested that there's a lot of things going on in your business that isn't going to cause that to happen or may not cause that to happen.

I'm not quite sure I suggested that. I think what I pointed out was that we actually have other things besides wireless in our business. We have high-performance analog. We have DLP. We have an assortment of other markets that we sell into, some of which are going to be growing, and some of which may not be growing as fast. That's independent of what wireless may or may not be doing. I would also remind you that coming into this quarter, we had revenue growth and inventory growth to support it for the calculator business that we have. That, of course, will have a bearing on our revenue outlook both in third quarter and fourth quarter and how we match our inventories up to support that, just as an example. Jim Covello - Goldman Sachs: Okay. That's helpful. Is it too early to start thinking about or make incremental comments on 2007 CapEx? You guys have done a great job of keeping the CapEx at very, very low levels.

Yes, we are still in the early stages of our planning on that, so we don't have anything to really give you some color on that just yet, Jim. Jim Covello - Goldman Sachs: Okay. No reason to believe, though, it would deviate from the strategy of pretty low capital intensity, given the kind of combined outsource, in-house manufacturing strategy?

Right. As we take a look at the how the overall foundry market is shaping up and what capacity looks like out there, it certainly supports that view. Jim Covello - Goldman Sachs: Terrific, thanks.

Thank you, Jim. Next caller, please.

The next question comes from Tim Luke from Lehman Brothers. Please go ahead. Tim Luke - Lehman Brothers: Thanks. So just to clarify, Ron, you were saying that you were shipping into the channel less than what's being shipped out in the second quarter. Should we expect that to continue in the third quarter?

Let me not set any expectations for third quarter. What I said was that, certainly, out of the channel, re-sales grew at about the same rate as TI's overall semiconductor growth rate, while our revenue growth from shipments into the channel was less than that. Tim Luke - Lehman Brothers: And with respect to inventory in the channel, any color there would be helpful.

Yes, distributors are currently carrying less than eight weeks of inventory. Their turns are in the range of six to seven, although inside that range over the last quarter, turns actually have gone up a little bit. So, again, we think distributor inventory is probably if anything, lean certainly, versus excessive. But, generally, that that's where the distributors want to be carrying it, and we agree with them. So we think the distribution channel looks very healthy today from an inventory perspective. Tim Luke - Lehman Brothers: Great. Ron, with respect to the wireless, up 4, is your infrastructure associated with wireless included in that number or does that strictly relate to the handset business? As part of that, I was just trying to frame within wireless, if it is included in wireless when you describe it, how much is wireless infrastructure roughly?

Okay. Yes, it does include infrastructure. Infrastructure first half of this year is about 6% of our total wireless revenue. If you look at the sequential infrastructure trend, it was up 4%, which is the same rates as the overall wireless, so it didn't really change the numbers much. Same thing year on year. Overall wireless is up 27%. Infrastructure was up 30%. So it didn't have a big impact on numbers either way. Tim Luke - Lehman Brothers: Lastly, if I may, just on DLP outlook. Looked like it was pretty healthy this quarter. Given some of the noise in some areas of consumer, could you give us your sense of how it looks, looking into the second half?

Again, we don't specifically break out our outlook. If you look at the television market, television market probably peaks out in fourth quarter for big-screen TVs. Certainly, we have to be selling into that channel. There's probably a 12-week pipeline between our sale of a DLP chipset and the ultimate consumer purchase, plus whatever our customer might want in terms of inventory. But that should give you some perspective of seasonality there. Tim Luke - Lehman Brothers: Thank you.

Thank you, Tim. Next caller, please.

The next question comes from David Wong from A.G. Edwards. Please go ahead. David Wong - A.G. Edwards: Thank you very much. Can you tell us a little bit about your 3G business? Roughly what percentage 3G is as a percentage of all the wireless? Is the profitability for 3G higher than the rest of wireless?

Okay. As a percentage of revenue, I would say first half of this year, it probably represents about one-third of our wireless revenue. If you compare that to 2005, I think in 2005 3G represented about 25% of our wireless revenue. So, certainly, as it continues to grow faster than the market overall, as well as the rest of our wireless revenue, we're benefiting and you're seeing that show itself in the numbers. In terms of profitability, we don't break out profitability by various business or product lines within those business. So I'll have to leave that one alone. Did you have a follow-on, David? David Wong - A.G. Edwards: Yes. We've talked a lot about wireless, and I think everyone's concluding from your comments -- at least your dealers -- that the wireless markets are in good shape. Can you give us a very quick rundown of the other end markets that you play into? Are there any end markets you're seeing that are weakening?

I couldn't understand you completely, David. Is that an inventory question or is that an overall demand? David Wong - A.G. Edwards: It's a demand question.

There's nothing that jumps out at us. When we look at general growth trends second quarter versus first quarter, growth was broad-based across various major product lines. There weren't even really any major outliers to our expectations. Probably, I think in the PC market, that one is pretty well understood that that is an area that has weakened and is running weak. But outside of that space specifically, if we look at what DLP and other products tell us about consumer seems pretty solid. If we look at broadband, our broadband revenue grew 4% sequentially, 40% up from year-ago. So that space, especially the residential gateway piece of it, seems like it's doing well. The PC peripheral markets seem to be holding well. What we see inside businesses, like high-performance analog and how they read on the industrial space, certainly, I would characterize that as strong as well. So certainly, nothing outside of the PC market that I would characterize as weak or weakening. At the same time, things generally running in the quarter as we had expected for second quarter. David Wong - A.G. Edwards: Great. Thank you very much.

All right. Thank you. And let's move on to the next caller, please.

The next question comes from Dan Jenkins from State of Wisconsin Investment Board. Please go ahead. Dan Jenkins - State of Wisconsin Investment Board: Good evening. I was looking at the balance sheet and your cash flow statement and obviously the cash balance is up significantly, in part due to the sale of Sensors & Controls. Your debt you're down to a $42 million piece that matures next spring. What's the plan for your cash and your capitalization going forward?

Dan, you've seen us actually have several fairly large stock repurchase announcements over the last year-and-a-half or so, plus a couple of dividend increases over the last year-and-a-half or 20 months or so. I think you'll probably see more of that or expect more of that in the future, as long as we continue to generate cash the way we are. We continue to, of course, invest it internally in the form of both our R&D as well as to the extent that we need to build our capital plan for footprints internally; but to the extent that we generate cash beyond those needs, we have been looking at our dividend structure. As I mentioned, we raised it twice in the past 18 months or so. We've also been increasing our repurchases. We presently have about $3.3 billion of repurchase authorization remaining. That will allow us to, certainly, be tapping into some of that cash over the foreseeable quarters. Beyond that, there's not a whole lot more for me to add in the way of color on that.

Do you have a follow-on, Dan? Dan Jenkins - State of Wisconsin Investment Board: Sure. In the DLP market, a number of the LCD makers talked about that they saw some glut in the LCD TV market, that maybe demand wasn't quite as strong following World Cup and so forth. I was just wondering, are you seeing that same sort of oversupply or inventory channel in the big screens?

Actually, Dan, we're not. Our DLP inventory levels, to the best we can call them all the way through their channels looks very healthy. So we're not aware of, either on the TV side or on the front projector side, any inventory issues in the DLP space. The one thing I might just contrast a little bit is with DLP we're really focused on big screen, so greater than 40-inch televisions. Even though LCD is starting to reach up into that space, most of the LCD TVs are still what I would call smaller screen sizes. So, that could partially explain why there's some different dynamics between what those manufacturers would be seeing as well as versus what we're seeing with DLP. Dan Jenkins - State of Wisconsin Investment Board: Okay. Thank you.

Thank you, Dan. Next caller, please.

The next question comes from Michael McConnell from Pacific Crest Securities. Please go ahead. Michael McConnell - Pacific Crest Securities: Thank you. Ron, I know it's a little bit early, but I’m still going to ask the question. With respect to Q4, on the outlook on wireless is there any concern internally that we could be looking at a little bit of a hangover in Q4, or maybe some more acute seasonality?

Mike, you're right, it is too early. We're not going to address that, although there's always that risk. Part of it just depends on in Q3 customers will be better fine-tuning their expected demand for the Q4 holiday. That risk is always there. We don't comment at this point on the quarter. But I would say it's not anything we're specifically focused on at this point. We're focused on meeting customer demand for Q3. Michael McConnell - Pacific Crest Securities: Okay. Fair enough.

At the same time, certainly given what's going on with the manufacturing cycle time, we have our early views of Q4, but we just don't make those public at this point. Michael McConnell - Pacific Crest Securities: Sure, understood. With respect to DRP, if we look at that ramping, you said that's going to be ramping here in the second half of the year into next year; could you remind us what the incremental dollar content is that you capture within that single chip?

It will vary somewhat based upon manufacturer. So, for example, if we're talking about a manufacturer that today TI only supplies the digital baseband, it certainly will be a more sizable content increase than if the customer is buying a full chipset from us. I would say pretty much across the board, we will see incremental value in the form of the RF components. We provide relatively few RF components in our chipsets today. So, at a minimum, that will be incremental value. But, certainly, for those where we're not providing, for example, analog baseband, analog power management functions, it will be a bigger step. In general, depending upon the future set and such, that DRP-based single-chip solution will range probably from, call it $5 or so up to about $10 in ASP. So, again, there's going to be a range of ASP, depending upon the feature set that customer is buying. In some cases that will represent a sizable increase in content, in others it will be less so. Michael McConnell - Pacific Crest Securities: But if we were to take an average, would it be fair to assume, $1, $2?

I'll let you make the assumptions on averages for us. That's trying to call the mix across various customers. We're not going to publicly do that. Okay, Mike, thank you, and let's move to the next caller, please.

The next question comes from Charlie Glavin from Needham & Company. Please go ahead. Charlie Glavin - Needham & Company: Thanks, guys. Maybe playing the counter to Jim Covello -- if I take a look at your mix, Ron, and the fact that you've had it flat, even as the high-performance analog has increased and still trying to work down or improve the on-time delivery, could we actually see inventories increase as we head into the back half of this year? But more importantly, maybe even longer term? It's been relatively flat over the last couple years, even as the mix has improved. Secondly, are you fully resolved in terms of your back-end constraints? Is there still any work left to be done on that?

Charlie, let me go ahead and try that again there. One of the things that could structurally change our inventory over time goes back to the comment I made about some of the critical process lines that we have. We are going to be much more opportunistic at going ahead and building ahead as some of those process lines come open, rather than just leave that capacity idle. We're going to be more opportunistic about building ahead and using up that capacity on those lines and carry more inventory, again, so as not to repeat the situation that we experienced this past year, when we were having a difficult time, as you mentioned, trying to keep up with our customer demands. Outside of that, from the back-end question, we continue to spend quite heavily in capital in the back end. To the most part, the equipment is in place, it's just a question now of processing all the product through it. We're continuing to add, but we aren't nearly in a situation like we had been for those last few quarters. Charlie Glavin - Needham & Company: Kevin, to the reason for asking also on the back end is your mix has not only shifted in terms of product mix, but if I'm not mistaken, your WIP is actually more fungible in terms of getting it into finished goods. So even though you said that you were increasing utilization of your front-end equipment, I'm not sure if you completed the analysis, but would average days actually stay relatively the same, even though maybe the percentage of WIP increases over time? Is that pretty much a direct function of, say, some of the die coming out, being able to go into anywhere from three to six different final good type of SKUs?

Yes, Charlie, that's a really insightful question there, and you're hitting right on the hard part of trying to compute this thing. That has to do with, as your mix changes for us, for high-performance analog, for example, which is quite high gross margins, the dollar cost of course of the inventory itself is less because the margins are higher. That does have an impact when you try to do the math on how many days or dollars of inventory you're going to compute. So it's very much mix-dependent. That's why you'll hear us say that we're quite comfortable with increasing our inventory levels, and we're not necessarily characterizing what that will translate into in absolute dollars, because it will be depending upon the mix and the timing and other things that are moving around inside our business from quarter to quarter.

But if you look at high-performance analog, call it pure play companies that are out there, they tend to run well over 67 days of inventory, in many cases up over 100 days of inventory. Charlie Glavin - Needham & Company: Right.

So there is a high-performance analog model that says you carry inventory, you carried die bank in order to minimize lead times and provide flexibility. Certainly, the financials associated with the profitability associated with that marketplace, certainly justifies that kind of inventory model. Charlie Glavin - Needham & Company: Got it. Thanks, guys.

Thank you, Charlie. Next caller, please.

The next question comes from Allan Mishan from CIBC World Markets. Please go ahead. Allan Mishan - CIBC World Markets: Hey, guys. Quick clarification. Is it a fair assumption that the royalties go back to the $100 million historical level here in September?

Allan, we aren't forecasting that amount of detail. I think what we're saying is that we think we've reached the bottom, in the $60 million to $70 million kind of range. We are signing on or re-signing licensees. We will include that in our guidance at the EPS level. To the extent that we wind up with something that is a royalty number that is outside the scope of our guidance, we'll of course call that out to you. But, specifically, we're not going to be forecasting that individually just yet.

But, Allan, also, moving back to 100 inside of the next quarter would be way too ambitious. It's going to take time for us to get through these various renegotiations. Our third quarter estimate, even though we don't think it will go down from second quarter level, will be closer to that second quarter level and the kind of number that you're throwing out, at least what we've assumed at this point. Okay, Allan, did you have a follow-up real quick? Allan Mishan - CIBC World Markets: Yes, one follow-up. Are you seeing any big contribution at all from some of the periphery handset chips like GPS, Bluetooth, wireless LAN, mobile TV, any of those types of chips?

I think those are areas that we believe there's a great opportunity we're starting to see, but it's not sufficient that it's significantly moving the needle for us at this point. So, certainly 3G is a much bigger factor, as well as the whole low-end space. At the same time, I don't want to minimize that. I mean, we are seeing growth rates that are, what I would characterize -- I'm trying to add a couple lines real quick -- probably 30% plus sequentially in those type of connectivity products. But, again, it's off a relatively low base versus our total wireless number overall. Okay. Thank you, Allan. Let's move to the next caller, please.

The next question comes from Mark Edelstone from Morgan Stanley. Please go ahead. Mark Edelstone - Morgan Stanley: Good afternoon, guys. You guys had come into the quarter with some delinquencies in high performance analog. Can you just talk about where you exited relative to those delinquencies?

Yes, Mark, we didn't make the kind of progress in delinquencies that we had certainly set ourselves on plan to for the quarter, really just because orders remain quite strong for the quarter. So the kind of improvements that we would expect to have made, just simply were not made to our satisfaction during the quarter.

Yet at the same time, we brought on capacity to our plans. So, certainly that side of the expectations we fully met. The issue is just demand has continued to build on us in high-performance analog. Did you have a follow-on Mark? Mark Edelstone - Morgan Stanley: I do. If I back out DLP and royalties from the other revenues, it looks like the balance of the business there grew double-digits sequentially. Can you confirm that? What were the drivers? Given that growth, is that really sustainable when you look at processors, controllers, ASICs, and standard logic?

Let me just go through some of the factors there. We already talked about DLP. You're backing out the royalties, both the one-time settlement as well as the license expirations. Standard logic grew at a 5% type of level. Microcontrollers grew at about that same level. RISC microprocessors grew over 30% sequentially. That's probably not a trend that we would expect to happen every quarter, but we certainly welcomed it in the second quarter. That probably covers most of that space, then. Mark Edelstone - Morgan Stanley: But what about ASICs, Ron?

ASIC is such a small -- it actually grew close to 10%, but that really is a very small part of our revenue, probably less than 2% of our revenue so I wouldn't overly weight that growth rate. Mark Edelstone - Morgan Stanley: Can you just give a sense to what drove that 30% growth in the RISC processors, and what percentage of revenues does that represent today?

It is probably still in the 5%. I think if I look at 2005, RISC microprocessors were just under 5% of our revenue. Just looking at the numbers, it doesn't seem like it's changed significantly in first half. As you're aware, we have a specific customer that we manufacture SPARC processors for. So let me just leave my explanation at that. Mark Edelstone - Morgan Stanley: Okay. Thanks a lot.

Okay, thank you, Mark. We probably have time for one last caller. So if we can move to that caller, please?

The last question comes from Joseph Osha from Merrill lynch. Please go ahead. Joseph Osha - Merrill Lynch: Man, I must be living right.

You give yourself way too much credit. Joseph Osha - Merrill Lynch: Thank you, thank you. As I look at depreciation here and I just think about the next two years; I know, Kevin, you've talked before about this business CapEx running maybe 10% of sales. I do the math and it looks to me like, assuming that everything's five-year straight line, that I ought to see depreciation go up by maybe $100 million a year in '07, '08, '09, until it catches up with CapEx. Is that a good way to think of it? And then I have a follow-up.

I think eventually that math plays out, Joe. We haven't really forecast, again, details for '07 just yet, but I think of the timing of our spend back in the early part of the 2000s, I don't think at present it would be safe to assume too much of a change in depreciation year-over-year between '06 and '07. Joseph Osha - Merrill Lynch: Sure. But, you're disconnected by like, $400 million. That can't last. I'm just wondering when I start connecting the two?

Yes.

I think when you look out a little further in time, as you mentioned, '08, '09, sort of timeframes, then your math starts kicking into effect.

Joe, keep in mind in 2001, I believe it was, we spent $1.8 billion in capital, so we still will have the benefit. As we move into '07, we'll have the benefit of that rolling off the numbers, basically, in '06. So that's what will skew it somewhat yet. You're right, when you look at the '06 depreciation versus CapEx. But go back to see what's rolling off from five years ago. Joseph Osha - Merrill Lynch: So maybe starting in '08 those kind of recoup?

That's probably closer. Joseph Osha - Merrill Lynch:

We've used two methods, Joe, to get our extra cash back in the stockholders' hand. One has been in the form of dividend increases. If I recall correctly, I think we increased, albeit from a relatively small base, about 17% at the end of 2004, and about 20% about fourth quarter of last year. We've also been repurchasing shares significantly. In fact, in the last six quarters we have repurchased about $6.6 billion in shares. Joseph Osha - Merrill Lynch: But to be fair, the share count hasn't gone down by -- I was just doing the math. I mean, the share count's gone down, but not by that amount.

By about 233 million shares, yes. Joseph Osha - Merrill Lynch: Right. So, some of that's options-related, and some of it's real buyback. That's why I raised the question. We should expect more of the same, then, in terms of relatively modest increases in the dividend, and then lots of buyback?

I think that you'll see us continue to do the sort of things you've seen in the past couple of years, Joe. Joseph Osha - Merrill Lynch: Okay. Thanks very much.

Thank you, Joe. With that, we're going to wrap up the call. Let me remind you that the replay is available on our website. Thank, and you good evening.

This concludes today's conference call. You may now disconnect.