John D. Buck - Chief Executive Officer George Vandeman - Chairman, Special Committee Frank P. Elsenbast - Senior Vice President and Chief Financial Officer Keith R. Stewart - President and Chief Operating Officer Nathan E. Fagre - Senior Vice President, General Counsel and Corporate Secretary

Jamie Lester - Soundpost Partners Robert Evans - Craig-Hallum Capital Michelle Graff - National Jeweler Magazine Bill Briggs - Internet Retailer Debra Fine - Fine Capital Partners Richard P. Mansouri - DellaCamera Capital

Good morning and welcome to ShopNBC's Strategic Alternatives Review Process and Preliminary Results for Fourth Quarter and Full Fiscal Year 2008 Teleconference. Following today's presentation, there will be a formal question and answer session. At that time, instructions will be given. Until that time, all lines will remain in a listen-only mode. At the request of ShopNBC, today's call will be recorded for instant replay. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Ms. Nancy McGrath (ph) of ShopNBC. You may begin.

Good morning. Today's conference call may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that these forward-looking statements may involve risks and uncertainties that could significantly affect actual results from those expressed in any such statements. More detailed information about these risks and uncertainties is contained in ShopNBC's filings with the Securities and Exchange Commission. I would now like to turn the call over to Mr. John Buck, ShopNBC's Chairman of the Board. John D. Buck: Good morning and thank you for joining us and thank you Nancy. I hope you've had a chance to review the multiple press releases issued this morning. Our series of communications may seem lengthy, but I am sure you can appreciate this is a critical time at the company and there are a number of important items we want to review with you today. And then we will take questions at the end. When we last spoke, I said we'd get back to you by the end of the fiscal year with an update on the strategic alternatives review process. With the timing being so close to the end of the quarter, we decided also to report preliminary results for the fourth quarter and fiscal full year 2008 as well. Given the outcome of the review process, which we will plan to address in detail, we wanted to share with you the many initiatives underway at the company to improve performance and build a roadmap for the future. Let me begin by saying that fiscal '08 was very challenging and our preliminary financial results for the fourth quarter and full year are clearly unacceptable. We have gone to great lengths, implemented significant changes at the company this past year in an effort to turn around this business. As I announced in August, we embarked on two parallel paths to achieve these goals: one, explore strategic alternatives for the company and at the same time manage the business on a go forward basis. While I am very, very disappointed that we were unable to find a buyer or a strategic partner for the company at this time, I want you to know that we haven't closed the door on this option and we will remain open to all opportunities. I'd also like to say that throughout the entire strategic alternatives review process, we remain fully engaged in running the business and implementing strategies to improve ShopNBC's operations as well as develop new corporate strategies designed to grow the company's EBITDA levels, increase revenues and rightsize our expense structure for '09, which we will talk about later in the call. Part of these efforts includes changes and additions to the leadership structure at ShopNBC, our Board of Directors and at a strategic planning level at the company. As announced early this morning, I am pleased to report that the Board of Directors has promoted Keith Stewart to CEO of the company. We hired Keith back in August with the intent of naming him CEO following the transition period. The Board has been very impressed with how he has demonstrated his vast industry experience, decisive leadership skills while achieving many organizational improvements at ShopNBC. He quickly assessed the needs of the company and swiftly implemented dramatic but necessary organizational changes to the fundamentals of our business that have led to improved efficiencies and positive business metrics. He has a strong vision for this company and great optimism for our future. I am confident you will find Keith's new '09 roadmap for ShopNBC to be quite compelling. Concurrent with his promotion, I have voluntarily stepped down as CEO as part of the company's succession planning and will remain Chairman of the Board. As we have endeavored to reconstitute the Board this past year, I am pleased to report that Randy Ronning, a retail and TV shopping veteran with over 30 years of leadership experience, has joined our Board as a Director. Randy brings tremendous experience in TV shopping and e-commerce to our Board, and we very much look forward to his contributions and insights. When added to other recent Board deployments, we know have strengthened our Board comprised of five independent directors through a broad expertise in distribution, multi-channel retailing and governance. In addition to assist us in all areas of strategic planning and implementation, the company entered into a consulting agreement with Darlene Daggett. Darlene also an expert in multi-channel retailing, having 30 years of experience in this market space. We are excited about leveraging her highly relevant experience. Ms. Daggett will add incredible value to our company by serving as a Strategic Advisor. We are fortunate to now have three of the industries' best minds Keith, Darleen and Randy helping guide us. People who have worked together in the past, people who are experts in multi-channel electronic retailing and people, who know how to get things done and succeed. This is not to say our road to success hasn't been challenging or won't continue to be. The Board and management fully recognized the seriousness of our situation. And we are taking decisive action. Despite our sales and EBITDA shortfall on the fourth quarter, meaningful improvements were made to our fundamentals in a number of key areas across the entire organization, while protecting our cash balance. This is encouraging and I'd like to highlight a few. Our biggest opportunity for savings as the company is in our cable and satellite negotiations. I think all of you are aware that I'd indicated many phone calls that this has been our biggest, biggest operational issue. And in some ways we've been really handcuffed. With negotiations relating to approximately 19 million households completed, we are able to preserve our distribution footprint at a much, much more competitive rate. We are half way through the remaining negotiations. And we believe we will be able to retain a high percentage of our footprint while achieving a meaningful reduction in our cable and satellite fees. In addition, we continued to tightly manage our operating expenses in the quarter and reduced the company's exposure to bad debt. We made a number of significant process and operational improvements, while increasing both active and new customers. We aggressively manage our inventory, clearing out over $20 million worth with big reductions in the gem and gold categories. Return rates and customers service calls went down. And to broaden appeal and improve acceptance rates of our products among consumers, we continued to intentionally lower our average selling price by 33%, while not sacrificing our premium lifestyle brand positioning. Lastly, one of the biggest overhangs at the company has been the uncertainty surrounding the status of the redemption of the GE preferred stock. As mentioned this morning, we are pleased with our progress in our negotiations to restructure and extend our obligations today, which if ultimately successful would extend the repayment of this security and provide ShopNBC considerable time to complete the turnaround of our business by significantly improving our cash outlook and flexibility. We are close to reaching an agreement with GE. We have agreed on a framework for a deal that meets our business needs going forward with terms and conditions for both parties to be finalized in the next few days. In summary, with improved processes in place, our cleaner inventory position and a debt-free balance sheet, ShopNBC is geared up to enter fiscal '09 and continue executing the turnaround of our business under Keith's leadership. Despite the headwinds, we remain positive and confident about the future of our multi-channel electronic retailing business. We are being careful with our cash. We are improving ongoing business operations to restore financial performance. And we remain open, as I said earlier, to exploring a full range of opportunities to rebuild shareholder value. With that, our remarks today will focus on three key strategic areas: beginning with a very detailed overview on the outcome of the strategic alternatives review process by George Vandeman who is a member of the Broad and Directors and Chairman of the special committee leading the review process. We'll follow George's report then with Frank Elsenbast, our CFO, who will provide a detailed financial review of the fourth quarter and fiscal year '08 and then Keith will shed more light on our operational improvements in the most recent quarter, talk about the initiatives we are pursuing to improve performance and conclude by elaborating on our new roadmap for future success. Now I would like to turn the call over to George Vandeman.

Thank you, John. Good morning everybody. On the company's last earnings call in September, I discussed the fact that a special committee of independent ShopNBC directors had been created, and I had been appointed its Chairman. The other members of the committee are Joe Berardino and Bob Korkowski. The committee's mandate was to explore a full range of strategic alternatives to maximize value for the company's stockholders. As we announced this morning, after an extensive review process working with Piper Jaffray, our outside financial advisor, the special committee has concluded its formal strategic alternatives review process and we have recommended to the Board that the best option for the company at this time is to continue to operate ShopNBC as an independent entity. We went through a very comprehensive and thorough process that resulted in this recommendation. I would like to take a minute to walk you through the past few months and how we reached that conclusion. Beginning on September 10, 2008, we began to explore a wide range of alternatives and held discussions with a number of interested parties. As part of its role, Piper Jaffray initially contacted a total of 137 parties and executed confidentiality agreements with 39 of those. Of the 39, we received initial preliminary indications of interest from 13 parties. Based upon the credibility of their financing plans, we invited four of those parties into the second round of the process. Two of them were strategic parties and the other two were financial sponsors. The second round of the process included in-depth meetings and discussions with the company's management. And with access to an extensive electronic data room, each of the parties was given the opportunity to do full and complete due diligence for their bid. Now we had hoped of course to find a viable transaction through this process. Ultimately, however, in spite of the efforts that we've put into this, the contest did not result in our receiving any final bid. Piper Jaffray reported to us a number of the concerns and factors that prospective bidders cited to them. These included current market conditions, their economic circumstances, difficult retail and credit environments, the company's most recent operating performance and cost structure, the uncertainty at that time surrounding the status of the GE preferred as well as the uncertainties surrounding the early stage of our cable and satellite distribution negotiations. Now concurrently with the discussions with those parties, the special committee evaluated several other strategic options such as the distribution to shareholders through a sale of assets and liquidation of the company. However, we concluded that a liquidation of ShopNBC would not likely result in any distribution to our shareholders. While the company has considerable assets, we also have approximately $90 million in current liabilities and considerable future cash obligations. These future commitments are primarily contracts with our cable and satellite providers which total currently approximately $185 million. Payment of those liabilities and obligations plus the prior claim, of course, of the preferred stock in a liquidation scenario would have exhausted all of the proceeds from a liquidation of the company, leaving nothing for the current stockholders. Therefore, we recommended against taking any such action. Although the special committee has concluded the formal strategic alternatives review process, as John mentioned, we remain open to transactions in the future and we are committed to undertaking the best possible actions to enhance stockholder value. With that report, I will turn the call over to Frank. Thank you very much. Frank P. Elsenbast: Thanks George. Today, I would like to provide our estimated results for the fourth quarter and full year 2008 that ends this Saturday, January 31st. In addition, I will provide a review of our forecasted cash balance and an update on other key balance sheet items. Based on preliminary estimates, fourth quarter revenues are expected to be approximately $142 million, a 35% decrease compared with revenues of $218 million in the fourth quarter of last year. The shortfall in the quarter was due to an approximate 33% decline in the average selling price and a 2% decline in shipped units. This sales shortfall versus last year was driven by weakness in our fine jewelry and laptop computer categories as consumers reduced their purchases in these higher ticket categories. For the full year, net sales are expected to be approximately $565 million, a decrease of 28% over the previous year. Gross margin in the fourth quarter is expected to be approximately 29%, which is down from 33.3% in last year's same period. The decline in gross margin was driven by a significant level of clearance activity in the quarter as the company focused on reducing its existing inventory before bringing in new inventory for 2009. On a full year basis, our gross margin will be approximately 32% versus 34.7% in 2007. The company remains focused on tight control of our operating expenses. In the fourth quarter, total operating expenses are expected to be down 14% versus the prior year, driven by lower variable costs, lower payroll costs and reduced marketing spending. Selling and distribution expenses are expected to be down 16% and G&A is estimated to be down approximately 10%. Please remember that these estimates exclude the impact of equity compensation. EBITDA as adjusted is expected to be a loss of approximately $15 million in the fourth quarter compared with an EBITDA profit of $5 million in the year ago period, driven by the sales decline and lower gross margins. This was partially offset by the $10 million reduction in operating expenses at the company. For the full year, the company's EBITDA loss as adjusted is expected to be approximately $51 million compared to an EBITDA profit of $7 million last year. Estimated net loss for the fourth quarter is expected to be approximately $40 million compared to a net loss for the same quarter last year of $1 million. For the fiscal year 2008, the company expects to record a net loss of $94 million compared to net income of $22 million in the prior year. The Q4 net loss estimate reflects the impact of two non-cash charges: first, the company has concluded that the $6.4 million impairment on our auction rate securities which had previously been classified as temporary should be changed to permanent. This change is due to the continued illiquidity of these securities and uncertainties regarding their ultimate value. In addition, the company also recorded the $9 million non-cash charge related to its full power TV station in Boston, Massachusetts. The station was deemed to be impaired from its current carrying value of $32 million due to the depressed market conditions for TV stations. Both of these charges are reflected in the $40 million net loss estimate for the quarter. Now, I will give you a quick update on our balance sheet. Despite the challenging results recorded this quarter, we worked hard to protect our balance sheet. The fourth quarter is expected to end with an approximately $75 million balance in cash and securities. This balance is a $7 million reduction from the prior quarter, driven by the $15 million EBITDA loss, offset by continued working capital management. As John mentioned, inventory declined by over $20 million in the quarter, as the company aggressively cleared its existing inventory in anticipation of new product introductions and merchandize expansion in fiscal 2009. Capital spending for the quarter is expected to be approximately $2 million. Again, I would remind everyone that these are forecasted results as our quarter has not yet ended. We expect to release our final financial statements in the third week of March, after we have closed the books and completed our work with outside auditors. That concludes my updates. Now, I'll turn the call over to Keith. Keith R. Stewart: Thanks Frank and hello everyone. It's very good to be with you today. Let me begin by saying, thank you to John for his service and commitment as CEO over these past weeks and months. Working with him has been a real pleasure. Listening to his keen thoughts about the business has been insightful and helpful as part of the company's success and planning. His continued support as Chairman of the Board is much appreciated. As I assume the new role as CEO and its responsibilities, I remain fully committed to turn the business around. I am 150% engaged, along with the rest of our talented workforce to rebuild shareholder confidence and get you excited about the future of our business. To turnaround the company's financial results in 2009 and achieve sustained profitability, the business will be significantly repositioned in the next 12 months by focusing on improving components of the business that are more within our control. We'll work towards delivering a clear and compelling consumer proposition to drive further progress within a solid business model. We'll also significantly reduce our cost structure of this business to a level that allows this company to achieve a consistent profitability and reverse the losses experienced in fiscal 2008. These are our corporate priorities going forward in '09. To-date, the company has taken numerous actions to significantly improve our financial performance for fiscal '09. And as I said, reduce the organization's cost structure and cost of sales. Well, we're not providing '09 financial guidance at this time. I'd like to share with you the initiatives that outline our roadmap for the coming year. Then, we'll take your questions. Generally, we are touched on the cable and satellite part of the cost structure. In the approximately 19 million homes negotiated to-date, we've been successful in preserving virtually all the homes in these contracts. The continuation of these agreements ensure that we'll have the broad footprint to sell from and grow during the next fiscal year. Maintaining our distribution footprint is key, but it's not enough. Reducing cable and satellite operating expenses also needs to happen. As you know, cable and satellite fees represent approximately 50% of the company's operating expenses. With the majorities of these agreements expiring, it's critical to reset these at competitive rates in fiscal '09. All our negotiations are ongoing, I am highly encouraged with the progress of meaningful rate reductions and improvements to our channel positioning. I would like to go in a much more detail on this part, but I also don't want to jeopardize our ongoing negotiations. I appreciate your understanding. In addition to reducing our cable and satellite cost structure, we are highly focused on reducing other costs that are within our control. At a high level, operating expenses over the past two years have been reduced by $23 million. This is a result of several difficult but necessary reductions in the company's salaried workforce, continued reductions in cable and satellite distribution fees and significant decreases in all non-revenue related discretionary spending. Other cost structure items within our control include improving product return rates, call center efficiencies and warehouse processing, reducing our transactional costs were central to becoming more competitive in the marketplace and restoring ShopNBC to profitability. In fact, we've already significantly decreased transactional costs pertaining to customer service contact rates in September of '08. This decrease has been driven by faster and more accurate delivery times. With respect to our improved return rates, delivery times, customer service and product quality we expect to report a return rate of 27% for the quarter, a reduction of 400 basis points compared to last year. Next, our cable and satellite fees, transactional costs are next biggest opportunity for savings. To the extent that we complete in order of faster, shift order processing to the voice response system or dot com, improve product quality and reduce return rates, we will continue to improve customer satisfaction and reduce the cost of each and every transaction. With meaningful improvements in this part of the business, you can quickly see how we can improve our EBITDA levels. We said we will significantly increase our gross margins as new merchandises made available to customers. We started to make progress in the third quarter in this area, with gross margins increasing from 33.7% in Q2 to 34.5% in Q3. But in Q4, gross margins were 29%. Let me explain. First, it was necessary to clear slow selling, high price jewelry in the quarters. Next, it was important to eliminate the pricing flexibility allowed to drive short-term sales. We increased product margin requirements in all categories. And all pricing is now formula based. In short, all science and no work. Finally, we'll be placing greater focus on unique products and offshore sourcing. As new products come in, we'll continue to aggressively manage our inventory. This past quarter, as John said, we successfully cleared over $20 million of inventory across all product categories with the largest reductions in high price gem and gold categories. This has allowed us to reduce our inventory levels by over 35% compared to last year. We'll also develop a predictable margin formula and profitable sales results model by testing new product and rely on reordered goods. This approach will allow us to learn more quickly about what products appeal to the customers, with lowered inventory risk to the company while maintaining competitive margins as well as significantly reducing merchandise markdowns. This new pricing and merchandise model will also significantly improve our merchandise margins across all categories. Our inventory hasn't ever been cleaner. This has put our merchants in a very unique position, who are willing and have the ability to buy fresh and compelling new products. To make good on these plans and initiatives we need to increase active and new customers. For the good plan is only as good as its execution, and I am pleased to report that customer counts on both of these fronts reversed trend in the fourth quarter. For example, in December, new customers increased by 23%, active customers increased by 10%. To broaden appeal and improve acceptance rates of our products in one... our customers next year will improve our merchandise mix by beginning to broaden our product offerings into more home, apparel, accessories and beauty products. This broader mix will continue the intentional decrease in the average selling price which drives new and active customer growth essential for a long-term sales and profits. Good execution is also depended on our improved sales and inventory planning. During the quarter, we made significant process improvements to our merchandizing, broadcasting, planning and programming teams by restructuring these key business units to bring greater focus, focused on profitability, focused on accountability and efficiency. As John mentioned, we've added two of the best minds in the industry to our leadership structure at the company: Darlene Daggett as a strategic advisor and Randy Ronning as a Board member. I've worked with both of them in the past and support the guidance going forward. Their guidance going forward will be invaluable. In alignment with our focus on reducing the company's cost structure, our focus on the customer is second to none. From ShopNBC's on-air and online presentation to its product delivery, every aspect of the customer experience is in focus with a goal to exceed their expectations. This spotlight on the customer experience is intended to drive new growth in current customer loyalty. Already, we are implementing weekly measurements to reduce customer service contact rates. To improve on this metric, we'll redesign the automated ordering process and call center process. Through every touch point with our customer, we will communicate a value proposition that's unique and differentiated. Our value proposition will embody a consistent flow of new products and concepts to keep ShopNBC programming fresh. On-air hosts and team members will also strive to improve the social community of our customer base and develop ways to interact with them on a direct relationship basis in ways that surprise and delight them. In summary, we are making meaningful progress with these operational improvements and efficiencies. Positive results are taking form. And we are laying a solid foundation to support our well planned and proven roadmap for new ShopNBC in '09. With that, let me conclude. 2009 will definitely be a year of opportunity and change at ShopNBC. Our goals and plans to turn this company around and achieve sustained profitability are all very clear. The majority of the big changes to our infrastructure are complete. I strongly believe that we are headed in the right direction. I am confident that we are taking the right actions that we are headed in the right direction and I am confident in our go forward execution capabilities. We certainly appreciate your time this morning and hope you are as exited about ShopNBC's future as I am. We will now take your questions.

Thank you. (Operator Instructions). Our first question comes from Jamie Lester of Soundpost. You may ask your question. Jamie Lester - Soundpost Partners: Can you guys discuss how NBC shaped the process? I mean we've from various people that NBC basically let certain parties bid. You mentioned in your press release and in the comments that the NBC preferred was a big overhang for people. Why was NBC allowed to determine the fate of the company and basically guide its preference when obviously they are not the controlling shareholder? And my understanding is under Minnesota law that their preferred really doesn't have very much in the rights... in the sense of voting rights or the ability to force the company into bankruptcy or financial distress. Can you just talk about what... why the balance was struck so heavily towards GE's and NBC's concerns and not towards the rest of the public shareholders?

George, you want to take that?

Yes, Jamie at least and so far as the auction process went, I could only answer your question with respect to that. But they did not, to our knowledge, they did not shape or affect anything. I think we indicated that they were in the process as a bidder and we also were aware of how they planned on approaching a bid. I don't want to go under too many non-public details, but nevertheless they were a bidder. They showed up with a couple of companies that they wanted to partner with. And they were an active bidder throughout the whole process until the very end when I, as I indicated, we receive no final bid from anyone including NBC. Now as far as we were concerned at the committee level and at the Piper Jaffray level, they were nothing more than a member... one of the two strategic parties at the end of the process. Jamie Lester - Soundpost Partners: All right. Well I would say that reports from various parties involved in the process would indicate otherwise.

Yes, that may well be. But if you are asking from our perspective, as the special committee and as our financial advisor, we were not privy to those. Now we have also... the Board has also heard about, fairly recently, some of those stories that you referred to. Jamie Lester - Soundpost Partners: Can you also discuss... you kind of painted it as well if you look at the company and you have to pay off all the distribution agreements, there is nothing left for shareholders. Obviously, that's the case. But there is an alternative, which is sell assets and distribute capital to shareholders now and keep running the business going forward and put the burden of those liabilities either on the distribution partners or on the GE preferred or any of those parties that should be receiving it. Why not dividend out cash? Why not monetize some of the assets and take a half step towards showing some concern for the common equity in this company?

Well the problem is, and maybe Nathan can speak to this further, Jamie, but the problem is that we are under the strictures of Minnesota law in terms of distributions to stockholders. And we cannot... we are not permitted to make any distributions which the Board would determine might impair the solvency of the company. And so if you take a look at the cash and how much of the cash is in the auction rate securities and the upcoming obligations that we are facing, basically, there will be... we talked about selling assets to bolster our cash position to face the future but it would not enable us, as I understand, to just start kicking out funds to stockholders if it would jeopardize our future solvency. Nathan, do you want to elaborate on that?

Yes, George, I think that's an accurate summary given the cash needs of the company now, the directors need to look at the ability to operate the business and pay it best as they become due going forward. And so to sell assets such as the TV station or something, the Board's first duty would be to make sure that it could pay its debt on a going forward basis. So it's... Jamie, that would not right now be a source of dividend opportunities for shareholders at least till we get through some of the other near-term issues. Jamie Lester - Soundpost Partners: And when you say pay its debt, to which parties are you referring? My understanding is the preferreds don't have the ability to have any impact on my consideration.

Yes, the debt we'll be talking about are our operating liabilities mostly to our cable and satellite distributors but also to our vendors, very importantly to our vendors.

Yes, Jamie, payment on the preferred is subject to the same legal considerations that I described in terms of dividends to the common. Jamie Lester - Soundpost Partners: Okay. Can you, I guess, discuss the current Board of Directors? My sense and I am sure you will hear this from a lot of other people is that none of the shareholders would support the current Board if given the choice given the enormous construction value (ph) that you guys have presided over. Can you discuss kind of any plans to change the Board, any plans to I guess certainly change the leadership of the Board. And if you want to maybe make a half order defense of why you should be given the right to run this company after what's happened over last few years then you be guest.

Jamie, this is John. I'll take a shot at that. And then my colleagues can join in. And certainly not to be defensive to be very open here as we are, as I said we've just been handcuffed as you know by the fixed-cost structure. And in '08, we finally have an opportunity with 65% of those contracts expiring. I think as you know those contracts were all signed six, eight, 10 years ago. And looking at all of the options, we just could not find a way to get out of those things. So, we've been really handcuffed. That's been a biggest, biggest business challenge for us as a cost structure and our revenue structure does not support the cost structure. Now as it relates to the Board, I hear you. I understand. I can tell you I have shared this with the Board. As we announced today, we are bringing on a gentlemen, Randy Ronning, who has got 30 years of, as I said, retail and home shopping and internet experience. He and Keith have worked together. He was at TBC his last assignment for several years. We're bringing on Darlene Daggett as an advisor to Keith and to the Board. We recently brought on Joe Berardino as a new Board member. And so we are listening to our owners. We're trying to respond. This is a very difficult time for this company, for sure. But, again I would just tell you I think today there should be hopefully more hope than there has been in the past, and it's principally because of these cost structure we're able to deal with. Not to say that we aren't going to have some tough times going forward this year with the economy and consumer spending, but I think with the plan that we put forward and the Board has approved and we continued to get these kind of new negotiations rates. I personally think better days are ahead. Now, do we want to turn the Board over and start over with a new learning curve, I don't know if that would be a good move to be honest. This Board, certainly, for Keith and myself, we are so aligned with the shareholders. I think you know we've taken everything in stock. I think my tax liability is a multiple of what the value of the stock is today. So this isn't some sand bucks that I am having a lot of fun playing in and I am enriching myself. We are doing our absolute best. I will tell you this Board meets by phone or in person almost weekly, has been for the last several months. And we are working as hard as we can and we've got this very difficult problem that for the first time we have hopefully an opportunity. So, I leave that with you. George, I don't know if you have a comment or --

Well, the only thing I can add to that, John and Jamie, from the standpoint of my role as the Chairman of the Nominating and Governance Committee. We are actively engaged in a review of new Board candidates that they have television home shopping experience like Randy. And one of the candidate that were in the process of interviewing. We're also looking for women who have relevant experience. And so we are actively engaged in looking for new Board candidates that have requisite experience. And as John pointed out we have two brand new directors and neither what could we paying with the past really.

The next question comes from Bob Evans from Craig-Hallum Capital. You may ask your question. Robert Evans - Craig-Hallum Capital: Hi. Good morning, everyone. First, can you clarify the strategic process? Does that remain open as it relates to further discussions or do you view it close right now?

This is George. No, we do not view it as closed. As I think we said in the press release and in my remarks and in John's remarks that we remain open to any transactions that may come along. Robert Evans - Craig-Hallum Capital: Will there be a... may be you could elaborate on given there were no final offers, the hurdle, the biggest hurdles that you all. And for example, if it's the GE preferred, sounds like you are close to having summary negotiations there and you're also relatively close to having your distribution task more firmly set so then a potential buyer would know what they're getting into. I mean is it a situation where having those questions answered opens up new interest or if you could elaborate, please?

Yeah. I certainly having those two issues resolved with... there were internal and external factors that impacted the results of the process. The internal factors you've just put your finger on two of the major ones. The third major one was our operating performance. The external factors obviously was the financial meltdown, and which I think occurred right around the start of our process. And that was the primary external factor. There were other situations where one of our best strategic potential buyers, one of our very best, had at internal, unexpected internal development which took them out of the running, but they could well come back. So, yeah I mean there is no question that as these internal issues are addressed and resolved in those with the overhang of those concerns are gone and the external economy and financing in the whole financial system, it starts to get right it, you could... we could well see interest again. Robert Evans - Craig-Hallum Capital: Okay. And I know, it's difficult to give any type of guidance right now. But can you give us any sense of on a quarterly basis, how much you are, given what you have done thus far, how much your cost structure is down with distribution costs and other G&A cuts per quarter? I mean are we talking 5 million lower, I mean as we kind a look into '09 relative to the end of the '08?

Hey Bob, this is Frank. And we expect the cost structure to be down double-digits next year. And so that's going to be approximately in excess of $25 million. And the changes in the cost structure will probably be relatively uniform throughout the year because most of the reductions in the cost structure are coming from cable negotiations that have reduced rates that are effective today. The reduction in force that we did earlier this month, the piece that Keith talked about that will evolve a bit this year as we continued to reduce our transactional costs and lower our return rates. But I think you are going to see the majority of it spread fairly evenly through the year. Robert Evans - Craig-Hallum Capital: So, at least 6 million a quarter perhaps more?

Yeah. Robert Evans - Craig-Hallum Capital: Okay. Okay. And John, can you comment on distribution costs for the 19 million homes that you've done thus far? And John or Frank, as how much are we, can you give some sense of magnitude, are we... the savings thus far is a double-digit millions? Is that you still got I think more than half of the homes yet to be renegotiated? Can you give us some sense of magnitude?

Yeah, thank you, Bob. And we do, we are right in the middle of continued negotiations as we've extended some of the contracts in a month-by-month basis. But those that we have negotiated, we significantly reduced. And I think I told everybody, we were running in the high teens as a percent of revenue, now where the revenue at, it's in the low twenties, QBCs in that 4, 5, 6%, HSN is in that 8, 9, 10%. And I think an earlier calls I always said we want to be closer to where HSN is. I would say to you we are achieving that goal. I would say the contracts that we have signed are below our breakeven point by a double-digit percent. And it's that classic saying, sometimes you are strongest when you are weakest, and we have an opportunity here. And this is the one opportunity we have and we have to really take advantage of it. And that is to be very strong in these negotiations. I will tell you the one with double-digit million homes, that went right up till 10:30 New Year's Eve night. We were doing at 6:30, 7 o'clock. So you're going to... that's the nature of this business. But as I said earlier, we've been handcuffed because we've never even had the opportunity to negotiate these contracts that were put in place ten, eight years ago. And just to piggyback on your earlier question, based on the announcements today and going forward, I just think this company is a lot more attractive going forward now than less attractive for sure. So I think that's going to create some opportunities for us. Robert Evans - Craig-Hallum Capital: Okay, all right. Thank you.

The next question comes from Michelle Graff, National Jeweler Magazine. Michelle Graff - National Jeweler Magazine: Hello. I know you mentioned a couple of times in the call about jewelry, having the discount jewelry, jewelry being one of the reasons for your sales losses. Are there any plans to eliminate jewelry sales on ShopNBC and what are your plans for jewelry as a category going forward?

Michelle, thank you. This is Keith. The reason for the discounts in the jewelry was pertaining to the very high average selling price relative to what we are selling in the marketplace. Customers are looking for, as you know, more classic traditional looks. They aren't looking for things that are edgier and higher price points. Customers are acting more conservative rather than bullish. It's not specific to the jewelry industry; it's pretty widespread throughout. So it was necessary to take the inventory that we had that was well above the average selling price of what was working or selling in the marketplace and reduce that to sell that through. That in itself had a large impact on our gross margins in the fourth quarter. Moving forward, we still continue to focus on the jewelry world, but in a very different way than what we have in the past. We are looking for more moderate, conservative type of looks. I won't get into too much detail, but things that are more broadly accepted. Our average selling price in gems last year was over $550. You as an expert in the industry will certainly concur... certainly you will concur that that's not what the customer was looking to buy. That average selling price must come down, it must come down just to create broader appeal. And some of that more moderate robust conservative jewelry creates more new and active customers than the higher price jewelry. And finally, the return rates are much lower. So that equates to a happier customer, it equates to lower transactional costs as a company, which, those are something that we need to and will reduce in '09. Michelle Graff - National Jeweler Magazine: So you're looking to go with lower price point jewelry?

Yes. We are not going to throw the baby out of the bathwater. The things that are selling well and the customer is telling us it is working, we'll continue with that. But those things that aren't working as well, we are taking a very, very objective view. It's not subjective anymore, and I must say it has been in the past. It's all about financial metrics, it's all about productivity per minute, acceptable return rates and other metrics that we look at. So the customer will help guide us in the future. Michelle Graff - National Jeweler Magazine: But you can't get into what particular pieces you were talking about?

Not in detail at this time. I can't say that I have everything in front of that... in front of me right now. If you would like to have a separate conversation in the future, I would be delighted to have that conversation. Michelle Graff - National Jeweler Magazine: Okay. Thank you so much.

Thank you.

The next question does come from Ruth Garborestic (ph) with GTI. And as a reminder, please limit it to one to two questions. Thank you.

Hi, good morning. Can you tell us... elaborate on what gives you leverage as you go to the cable operators to negotiate the type of reductions that you mentioned in the call? Thank you.

Yeah, thank you. A very, very good question. What gives us leverage is one, we are still the third largest home shopping business. Two, the cable operators are... they are not necessarily interested in walking away from a good, good customer. Three... and by the way, a good customer and a good paying customer and an ongoing customer... three, we obviously share with them our belief on what's going on in the marketplace and where the competitive rates are. And four, we are also not interested in these long-term contracts which I think can be beneficial for both. Some of these contracts that we've recently negotiated are shorter term, two year, three year type contracts. By the way, I forgot to mention, in addition to getting significant reductions and below breakeven for us, we are also improving our channel placement and that's a big deal. Instead of being in the outer space with some of these other non-shoppings, we are now within right next door to our competitors. So that's a piece of the negotiations that I neglected to mention. It's not only the rate, but it's also the channel placement. I am going to let Keith also add on to my comments.

Thanks John and Bruce. The world is different today. It's not just the economy and everything else that's going on out there. It is very, very different for the cable and satellite operators. One, compared to eight, ten years ago where these agreements were signed on an analog basis, the capacity was very, very low. So with a small amount of real estate, if you will, those costs per channel were very, very high. Two, today, there is a large migration towards digital. Digital has a broad, broad capacity. Despite all the other technical issues for high definition and those types of things, there are more and more options for content providers. So with more real estate, obviously, there is a greater opportunity for cost reductions. Three, it's not about our footprint; it's about the productivity per household and the EBITDA and overall profitability per household. The way we are looking at this today as an organization, I am certain, is very different from the past. And finally, cable and satellite partners, although our friends and we will continue to work with them in the future, their world has changed. There is Internet protocol. There is phone companies. There are other things that have emerged as a competitive thing... force in the marketplace for them that's something that we need to be sensitive to in our negotiations. So our laser focus is on profitability and EBITDA on each one of those households in each one of those markets that we operate in. And I do want to say that although 65% of these were up at end of the year and the extension John mentioned is very, very true, we still have 35% of those subs or households where we have opportunity, albeit the contracts have not extended. It does not mean... or not up for extension... it does not mean or prohibit us from going to renegotiate improved channel positioning in each one of those marketplaces. Improved channel positioning clearly positively affects productivity. There are other terms in the agreements that we are negotiating to protect our company, protect our positioning in the future during the short term. And then finally, I will offer that this channel positioning issue that John had brought up is very, very important. And so we have to take a look at the entire package and we are doing it on a short term basis because of the digital marketplace.

Thanks.

The next question comes from Bill Briggs, Internet Retailer magazine. Bill Briggs - Internet Retailer: Hi. Good morning. My question is twofold. Can you tell me what percentage of Q4 and fiscal year '08 sales came from the internet? And then following on that, what role e-commerce will play in 2009?

Yeah. Bill, for the full year there is about 32%. That's our estimate on where we will land on a full year basis as the internet as a percentage of our merchandise business. I'll let Keith address the other issues?

Alright thanks. This is Keith. And the internet will continue to be a growing aspect of our business. Let me put it in context of our overall business. We are one of a select few in the United States that have a true, multi-channel electronic platform. Our television distribution has a single strength of making one item very, very special. In itself it's context is higher linear. It drives interest amongst consumers regarding products, but it's most significant weakness is its lack of breadth. Conversely, the most significant strength of dot com in the context of our business is the breadth and the assortment for products. And to the extent that we can leverage our distribution and advertising on air to drive our dot com sales and interest in dot comment, we will be serving our customer in a much better fashion and certainly much better than many other retail competitors in this space. So, a multi-channel platform has a very large strategic aspect in our platform. And I'll close by saying that dot com, television or any technology therefore in the future is merely a portal. Our strategy is to make sure that we can serve our customer any possible way and where she wants to served. Through dot com, through television, or where she tells us that she wants ShopNBC services. Bill Briggs - Internet Retailer: Okay. Thank you.

You're welcome.

The next question comes from Debra Fine, Fine Capital Partners. Debra Fine - Fine Capital Partners: Good morning. John, are you giving up your salary now that you are no longer CEO?

Absolutely. And I wasn't really taking that salary Debra. The CEO, I was taking the stock but not the salary. Debra Fine - Fine Capital Partners: Okay. Could you, and I am curious to when you, when in response to one of the prior questions you seem to blame the majority of the problems that ValueVision has had on the cable contracts. And I'm wondering how you see the Board's responsibility towards the CEO turned over the hirings and firings, the impact that may have had on morale, the inventory management policy, the pricing policies, the mix issues. And if you feel that those who have not been issues that have impacted ValueVision's performance and if the Board had no responsibility to manage any of those issues.

Wow. Okay, let's... in terms of the footprint, I don't want to go back unnecessarily blame previous management, because at the time eight, 10 years ago, when we were at 4.5 million homes, I think strategically there was a belief that if we could increase the number of homes, the sales will come along. And so, I think probably back then that probably it was a good decision, the right decision. We grew it from 4.5 up to we're today 71 million. Hindsight is always 20-20. The sign contracts that 10 years in duration that's some awfully, awfully long time to have contracts that grow uncontrollably from X number of home to 5, 6x number of homes without any control on our side and the impact on productivity. I mean those are... but if you go back in those days that one could argue and understand why they did what they did. But I will say Debra it has been, we have been handcuffed with the footprint. I think we, as you and I have talked in the past and other shareholders have talked, we've really taken as much cost out of here as we possibly can. We're continuing looking at it. But the footprint has been a big, big anchor for us. And that's the reason I am so optimistic. In terms of the CEO turnover, I think you got to lay that at the Board's feet. I won't run away from that. I think, if you go back in time we've not had as much CEO turnover. I think prior to me being interim person was in place for three, four, five years. Previous to that, it was five years. It's been this past year, where I served as an interim. We made a higher, I think you can put that right at the Board's footsteps that that was a mistake. And it would have been probably the easiest just to not do anything. So that was a tough decision and quite frankly that was unanimous. And as a Board, we came to that conclusion. We came quickly to the conclusion. In terms of the officer turnover, I would say then you had less officer turnover in the last year than prior two. I mean the previous two... I think when I became interim CEO Debra, as I remember now don't hold me to precise numbers here, but directionally I think we've had 18 officers turned over in a period of 18 months, something like that. So yes, if you go back to the '05, '06 timeframe there was a lot of officer turnover. I would say in the last year, I am trying to recall here, but I don't think we've had any voluntarily. I don't think we've had any turnover and as just as recent workforce reduction we did. In terms of the mix, the product mix, I would just tell you that this is been an ongoing struggle for this company. We've had the average surplus at around 225. I think you, everybody has agreed there is a correlation between average price and return rates. And that has really, that has been an issue for us. Are we trying to get down to the QBC level and HS level, HSN in that 40, $50? No. Are we trying to reduce from 225 to some place down in the 100 range that supports our lifestyle branding position? Yes. So that's been and then let's face it, we had a very, very difficult economy and consumer spending. No, I am not giving either excuses, but that has been what we've been dealing with. And again I don't want to go back. I'm not trying to be critical past leadership. It is what it is. It's what we have. We were very aggressive under George's direction and looking out in the marketplace. I again come back and I think with what's you are hearing today and the decisions we have made, I personally think this business is more attractive, growing more attractively and then left. And I don't know? Debra, did I cover all your items? Debra Fine - Fine Capital Partners: My understanding is that the Board's job is to maximize shareholder value.

Right. Debra Fine - Fine Capital Partners: And I assume that you've been receiving strategic plans from the last several CEOs and reviewing them and endorsing them or not and getting rid of the CEOs. And for you to say squarely that the biggest problem and the one that you really, your hands are tied with the cable contract seems to abdicate responsibility from the Board. And despite the fact that you're saying the company is in a great position, I think it's fact that 30 folks looked at the company and thought otherwise doesn't make a whole lot of sense to me.

Well, I shared with you my disappointment. I'd say the Board's disappointment. I think you and I both can look at the market and we can come to some conclusions on that as you look across the spectrum of all industries. Debra Fine - Fine Capital Partners: John, the problems was there before the market turned. And I think for the amount of time that you have said the quarterly results are unacceptable, they predate this downturn.

I agree. Now, keep in mind, I moved in November of '07. But I wouldn't disagree with you. I wouldn't disagree. Debra Fine - Fine Capital Partners: Thanks.

The next question comes from Richard Mansouri, DellaCamera Capital. Richard Mansouri - DellaCamera Capital: Hi. Yeah, thank you. Just one question. There has been a lot of talk about the strategic review process and the steps that you guys are planning to take, which ostensibly should be positive if you're going to be able to get these rates down. But I don't think there has been any talk whatsoever, at least I haven't heard it on the phone, about the stock price. Because when we talk about maximizing shareholder value as professional investors, we measure value purely by the stock price; I mean secondarily I suppose by distributions that we receive. Now the stock is trading right now at $0.28 a share. And it says here that the company has got $75 million in cash and securities. And I am hopeful unless you guys tell me otherwise, if you are going to be able to deal with this whole preferred issue. So I guess my question is will you guys at minimum commit to taking some of this cash and buying back stock, because I can't see any other use of capital that could deliver as theoretically greater return as buying back stock at a discount, especially a discount that is as disgraceful and as shocking as this one. Can you guys at least commit to do that?

Richard, this is John. I've heard you. We have the Board members on this call. They will all have heard you. The preferred, as you mentioned, we are very, very optimistic, confident we will get that done in the next coming days. In fact, the lawyers are meeting I think tomorrow, Thursday and Friday. You heard earlier from George as it related to some of the issues we have with the one-time payment and the stock buyback. But I think reinforcing that the Board will take this and react to it. Richard Mansouri - DellaCamera Capital: Well, I appreciate that, but let me just inject a notion here, and again we can speak about this. But just to be crystal clear, there is a difference. I don't think anyone can argue that there is a difference between distributing out cash, dividending cash and actually buying back stock. Now you guys have had in the past share repurchase programs in place. So I don't think that you guys could blame, if you will, the preferred or anything like that from tying your hands. So again, please tell me if I am misunderstanding this. But is there anything to your direct knowledge that would prevent you guys from buying back stock?

Richard, I don't... let me take that under advisement. Richard Mansouri - DellaCamera Capital: Okay. Could I ask you this, and again this is in full disclosure, you have the investment community tuning into this, what is your opinion of the stock price at $0.28? Do you think it's shockingly undervalued?

Oh, unbelievable. Yes, it's incredibly undervalued. Richard Mansouri - DellaCamera Capital: Okay, well, would you say, and again I know you can't speak for the Board, but do you think based on anecdotal discussions that you might have had with others that there is a general feeling that the stock is undervalued? What I'm getting at by this, again I don't mean to belabor this, but I guess what I'm getting at is if you believe it's unbelievably undervalued, presumably, there might be others out there, which again adds fuel to the fire why this company should take advantage, because, again, I agree, you've been saying that, if you can get these rates down, that could give you... that could optimally position you going forward. Well if that's the case, then I hope that the company can take advantage of, in your opinion, this unbelievably low valuation and reduced the share count. Because if it's true and your turnaround works, that just makes every remaining share worth that much more. I just wanted to inject that notion. Thank you.

Thank you.

The next question comes from George Thomasy (ph), Scott Makin.

A follow-up question on the cost structure, the 6 million savings a year or 25... I'm sorry, 25 a year, or six a quarter, does that include the distribution cost savings?

Yes. That does include the reductions in our cable and satellite distribution fees. That's the majority of it. The other main component is the reduction in our workforce that we took in the month of January. And then there has also been slight year-on-year reductions in the marketing spend.

I would like to... could you possibly put a little more detail on that, because if you pick up 5% at just 5% and the distribution cost times your current yearly revenue of 565, that's about $25 million. So I am wondering what happened with all these other cost reductions, personnel 27% reduction or whatever in the last two years if it's all coming from the distribution, I'm --

Right. No, if you look at the costs, our cost structure from 2007 through what were forecasted in 2009, we are expecting the cost structure to be down about 23% across that time span. So that's over a $60 million reduction. And so the pieces of that are the cable distribution piece, reduction in our salaried workforce, reduction in marketing spend and all other discretionary spending.

Okay. Thank you.

We do have a follow up from Jamie Lester of Soundpost. Jamie Lester - Soundpost Partners: Just to be clear, if you had an offer to buy the company today at $1 a share, is that something you would consider or would you exercise your discretion if that's not the best alternative for the shareholder?

Jamie, this is John. As Chairman, I would say we would consider it. Obviously, we'd want to understand the nature of the offer, the buyer. But I don't think -- Jamie Lester - Soundpost Partners: Why would, let's say, if someone said here is $1 a share in cash for your whole company, no financing commitments, why does it matter who the buyer is? Just so I understand that.

Well, again, it's the profile of the buyer, the capability of the buyer, the capacity, I mean the financing terms -- Jamie Lester - Soundpost Partners: Capacity to do what, sorry?

The financing terms. But Jamie, I think the answer that I would give is we are very open to all opportunities here. Jamie Lester - Soundpost Partners: The $1 a share cash bid with no financing contingencies is something that the Board would recommend?

The Board... for me as one director, I would say we would have an obligation to consider that offer. Yes. Jamie Lester - Soundpost Partners: Okay, thanks.

There are no further questions at this time.

Thank you everybody and we'll stay in touch. Bye.

This concludes today's conference call. You may disconnect at this time.