Antonio Perez - Chairman and CEO Frank Sklarsky - Chief Financial Officer Ann McCorvey - Vice President of Investor Relations

Jay Vleeschhouwer - Merrill Lynch Carol Sabbagha - Barclays Capital Richard Gardner - Citigroup Shannon Cross - Cross Research Ananda Baruah - Banc of America Securities Joan Lappin - Gramercy Capital

Good day everyone, and welcome to the Eastman Kodak Third Quarter Sales and Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to the Director and Vice President of Investor Relations, Miss Ann McCorvey. Please go ahead.

Good morning, and welcome to our discussion of the third quarter sales and earnings. I am here this morning with Antonio Perez, Kodak's Chairman and CEO, as well as Chief Financial Officer Frank Sklarsky. Antonio will begin this morning with his observations on the quarter, and then Frank will provide a review of the quarterly financial performance. Certain statements in this presentation may be forward-looking in nature or forward-looking statements as defined in the United States Private Securities Legislation Act of 1995. For example, references to the company's expectations regarding commodity costs, restruction and rationalization charges and payments, taxes, cash, cash flow, declines in our traditional businesses, segment and total company revenue, revenue growth, and earnings growth are forward-looking statements. These forward-looking statements are subject to a number of important risk factors and uncertainties which are fully enumerated in our press release issued this morning and our third quarter's Form 10-Q filed this morning. Listeners are advised to read these important cautionary statements in their entirety as any forward-looking statement needs to be evaluated in light of these important factors and uncertainties. Now I would like to turn the conference call over to Antonio Perez.

Thanks, Ann, and good morning everyone. Well, a lot has changed since we spoke during the second quarter earnings call. The growing economic crisis which started in the United States has now become global. When we spoke in July, our year-over-year digital revenue growth was 10% for the first half, and we were expecting our year-over-year digital revenue growth to be 8% in the second half. While we expect for the rest of this year to gain or maintain market share with our key product lines, as we just did in the third quarter, we are now forecasting the second half year-over-year digital revenues to decline 1 to 5%. When combined with a strong first half, we are now forecasting full-year digital revenue to grow 1 to 4%. The magnitude of the change in our top line forecast is evidence of the turmoil in the global economic environment. On the positive side, as I said before, our market share positions in our key digital products, such as consumer inkjet, digital cameras, digital services, digital plates and kiosks, are strengthening. We have a strong product portfolio in a weak market. For the remainder of the year and 2009, we will be implementing prudent growth plans for our digital businesses, aligning our cost structure with a new top line forecast, and above all, sharpening our focus on cash while maintaining our core strategy. We will emerge as an even stronger company. As we create and implement this plan, we have one criteria which anchors our thinking, and that is any changes we make in response to the current economic environment must stay true to our core strategy, which we believe will deliver the best return for our shareholders. Investments that are at the core of our digital strategies, such as consumer inkjet and extreme technology for commercial printing, are moving forward as planned and are critical to creating a growing consumable and service annuity business. When you combine our solid cash position, our market success with our key products and our investment in new products with our continued efforts to reduce working capital and costs, we believe we are well positioned for the recovery that will eventually come. We have updated our full-year forecast to incorporate the impact of the economic slowdown and the ongoing uncertainties surrounding the important fourth quarter. The new estimates reflects the negative impact on the top line of the slowdown in the global economy and the strengthening dollar, as well as the negative impact on the bottom line driven by competitive price pressures and unfavorable price mix that comes with diminishing demand. Therefore, we are taking a prudent approach to the fourth quarter because we see little evidence that the global economy will improve in any meaningful way in the short term. Specifically for full-year 2008, we now expect a revenue decline of 3 to 5% for the total company versus our previous forecast of 0 to 2% growth. The company forecast assumes growth of 1 to 4% for our digital businesses for the year, versus the previous forecast of 7 to 10%, and a decline of 16 to 18% for the traditional business versus the previous forecast of 12 to 14% decline. We expect our full-year earnings from operations to be in the $200 to 250 million range, versus the previously forecasted low end of the $400 to 500 million range. We expect the combined CVG and GCG's earnings from operations to be in the range of $20 to 60 million for the year, and FPEG to be in the range of $180 to 190 million, or approximately 6% earnings from operations as the percentage of revenue. With respect to cash generation before dividends, taking in account the current environment, we expect to generate in excess of $500 million in the fourth quarter. As I said earlier, we are intensifying our efforts of cash. We will continue to develop and implement plans to ensure that we maintain our strong cash position. Now let me talk specifically about out two digital segments, starting with the Graphic Communications Group, GCG. The turmoil in the financial markets has impaired the ability of our small to medium-size customers to obtain short-term credit. This turmoil began in the first half in the U.S. and in the third quarter it accelerated and became global. Our customers' inability to finance new equipment and the market-related slowdown in pin demand is negatively impacting our commercial business. As a result, we are seeing a number of the orders from Drupa being delayed, or in some cases, cancelled for now. GCG's third quarter revenue declined 2%, largely driven by low equipment placements across all product lines, with the exception of document imaging equipment, which grew 7%. GCG annuities continued to grow, primarily driven by digital plates and digital printing consumables, which each grew 7%, and Enterprise Solutions, which grew 6%. Overall, GCG's digital consumables and services grew 6% for the quarter, which highlights the strength of install dates we are creating. Our customers continue to demonstrate a preference for our products and as credit ability improves, so will equipment placement. Fourth quarter installations have already begun for a number of our new Versamark VL2000 printing systems, introduced successfully at Drupa. GCG's earnings from operations of $23 million were down $13 million from last, year, reflecting the negative impact of lower equipment placement and unfavorable price mix, partially offset by improved consumable volumes. Now the Consumer Digital Imaging Groups, CDG. For the consumer businesses, we are seeing some slower demand as consumers are making fewer discretionary purchases. However, our consumer product portfolio is well positioned with the value retailers, and CDG's third quarter revenues grew 7%, driven by digital capturing devices and consumer inkjet. Our consumer inkjet printers are now being sold in the top three U.S. printer retailers. Our digital picture frames continue to have leading market share, and the new Kodak Zi6 Pocket Video Camera, which provides high-quality video capability, has been very well received. Our digital cameras continue to win awards. The Kodak Easyshare z1012 was recently named one of the top 100 consumer products for the year by Consumer Reports. CDG's earnings from operations of $23 million, an improvement of $5 million over last year, reflects the continued improvement in cost structure, and year-over-year improvement in intellectual property licensing revenue, partially offset by continued investment in consumer inkjet and negative price mix in digital cameras. Now we will focus on our traditional business, FPEG. FPEG's revenue declined 18% in the quarter and 15% year-to-date. This was driven by continued industry volume declines in film capture and traditional photofinishing. Entertainment imaging declined 3% in the quarter, reflecting the delay in creation of new feature films as the motion picture industry deals with the Screen Actors Guild contract. FPEG third quarter earnings from operations were $77 million, or 10% of revenue. The $36 million year-over-year reduction in earnings is the result of the continued industry volume declines and increased commodity costs in the quarter, partially offset by the change in useful lives and continued reductions in cost structure. Now I will turn the call over to Frank, who will provide more details on our financial performance. Frank?

Thanks, Antonio, and good morning everyone. I will provide a bit more information around our third quarter financial results and then Antonio and I will be happy to take your questions. As Antonio indicated, we are operating in a very volatile and uncertain economic environment. Our third quarter results reflect markets softening in a number of areas, which has impacted sales volume, the mix of products sold, and pricing. And while there are certainly factors external to the company that we cannot control, we are focusing on the things we can control; specifically, we continued to make progress on our cost structure by bringing down SG&A and supply chain costs. Other examples include the continued progress we are making in the areas of working capital and discipline over capital spending. For the third quarter the company reported earnings from continuing operations of $101 million or $0.35 per share, an improvement of $69 million or $0.24 per share from the prior year earnings of $32 million, or $0.11 per share. This improvement is largely attributable to lower restructuring and rationalization costs, continued cost discipline, including SG&A reductions, and curtailment and other gains associated with certain plan changes in U.S. post-employment benefits. These changes in post-employment benefits, along with required periodic adjustments to actuarial assumptions used to measure the liability, resulted in a reduction of other post-retirement liabilities, also knows as OPEB liabilities, on the balance sheet in the amount of $919 million. These changes also provided a one-time benefit to the P&L of $94 million in the third quarter and will yield ongoing benefits to earnings and cash flow in the coming years. Consolidated revenues for the third quarter declined by 5% to $2.405 billion, and included a favorable foreign exchange impact of about three percentage points. This decrease was driven primarily by unfavorable price mix across all three segments and industry-related volume declines in consumer film and traditional photofinishing within FPEG. These declines were partially offset by increases in volume for digital capturing devices and consumer inkjet systems within CDG, and digital plates and document imaging within GCG. Our third quarter gross profit margin was 27.5%, a slight improvement from 26.7% in the prior year. This improvement was driven largely by the one-time benefit associated with changes to OPEB costs, along with cost reductions in digital capturing devices within CDG, and an increase in intellectual property licensing for the quarter versus the prior year. Other impacts include unfavorable price mix across the segments, partially offset by favorable foreign exchange and the impact of the change in depreciation useful lives implemented in the first quarter of this year. Our gross profit margin was also negatively impacted by silver, with a modest positive impact from aluminum, which together added approximately $15 million in additional costs for the quarter versus the prior year. The company was also negatively impacted by petroleum-based costs in the quarter. Consolidated third quarter GAAP pre-tax earnings were $129 million, a $104 million improvement from earnings of $25 million in the year-ago quarter. This was largely attributable to the OPEB change, lower year-over-year restructuring charges, higher intellectual property royalties, and cost reduction initiatives, particularly in digital cameras and digital picture frames, partially offset by increased investments in our digital businesses, including consumer inkjet and unfavorable price mix impacts and volume declines in our traditional businesses, digital printing businesses, and prepress solutions. On a segment basis, the Graphic Communications Group experienced a reduction in revenue of about 2% to $821 million as a result of market-related volume declines in equipment across prepress and digital printing, along with price mix impacts and continued declines in analog plates. This was partially offset by strength in document imaging and continued growth in digital plates along with consumables in color electrophotographic, and inkjet. There are clear indications of market softening including the cancellation or deferral of some orders taken at Drupa earlier this year. Earnings from operations in the quarter were $23 million, as compared to $36 million in the year-ago quarter. This year-over-year decline is largely attributable to market softness in the U.S. for plates and equipment in prepress solutions and higher manufacturing and distribution costs, largely related to petroleum-based materials. This decline is partially offset by favorable foreign exchange and a small improvement in aluminum costs. The Consumer Digital Imaging Group revenue for the quarter grew by $54 million or 7% to $820 million, versus $766 million a year ago. This increase resulted primarily from increased volume in digital cameras, digital picture frames, consumer inkjet printers, including consumables, and intellectual property royalties. This was partially offset by lower price mix, primarily in digital cameras and devices. The earnings from operations improved by $5 million from $18 million in last year's third quarter to $23 million earnings this year. The year-over-year improvement in earnings resulted largely from cost improvements in digital capturing devices, including SG&A and R&D, and higher intellectual property royalties, offset by increased investment in consumer inkjet and negative price mix in digital cameras and devices. As previously communicated, we continue to monetize our intellectual property portfolio. The IP deal completed in the third quarter, which benefited earnings in the quarter and will generate cash in 2009, along with our expected future deals, give us confidence that we can continue to achieve on average at least $250 to 350 million per year from intellectual property licensing for the next few years. With respect to FPEG, the Film, Photofinishing and Entertainment Group, revenue was down 18% from the year-ago quarter as we continued to see market-related volume declines in film capture and the traditional photofinishing business along with some modest softening in entertainment imaging, related to both economic conditions and industry concerns over Screen Actors Guild contract issues. Segment earnings came in at $77 million, a reduction of $36 million from the prior year quarter. This decline was due largely to lower volume and price mix in consumer film and the traditional photofinishing business, along with negative impact of silver, partially offset by continued SG&A and other cost reduction efforts, and the benefit from the change in useful lives assumptions. Year-to-date, our corporate pre-tax restructuring and rationalization costs were $46 million. We previously communicated that full-year restructuring and rationalization charges would be in the range of $80-100 million. Based upon market conditions and the overall economic environment, we are intensifying our efforts around rationalization activities. For this reason, we expect that total charges for restructuring and rationalization for the year will be between $125 to 150 million. The exact amount will depend on the timing around specific actions and the proper accounting treatment associated with those actions. Our corporate cash payments related to these efforts are still projected to be about $175 million for the year. For the quarter, cash generation before dividends represented a use of $102 million compared to a use of $23 million in the year-ago quarter, reflecting an increase in cash usage of $79 million. This increase in use is due primarily to lower cash earnings, including the favorable non-cash impacts associated with both the OPEB change and a non-recurring intellectual property licensing agreement. Proceeds from asset sales were also lower. These impacts were offset by improvements in working capital and lower restructuring payments versus the prior year. In terms of liquidity, we are pleased with the flexibility that our solid balance sheet provides us in the current economic environment. We ended the quarter with $1.842 billion in cash and cash equivalents, and total debt stood at $1.3 billion. During the quarter, the company repurchased approximately 14 million of its shares at a cost of $219 million. Since maintaining financial flexibility is critical in this environment, additional share repurchases will depend on our assessment of overall economic and market conditions. The overall share repurchase authorization remains in effect through the end of 2009 and we will continue to provide updates on the share purchase program at the end of each quarter. As with many other companies, we are seeing a significant impact to our business due to softening of the economy and the financial crisis, and this is translated into substantially changed business conditions. Consequently, our intention is to take a prudent approach to our operations in the fourth quarter and into 2009 in recognition of these external economic realities. As such, we are updating our 2008 financial guidance for the company. Please note that this guidance represents our current thinking based on what we know today. As most of you know, a significant portion of our revenue, earnings, and cash generation typically comes in the final quarter of the year. We now expect revenue growth from our digital businesses, CDG and GCG, to decline in the range of 1 to 5% for the second half and to grow 1 to 4% for the full year. This compares to previous guidance of 7 to 10% in the digital businesses. A large part of this reduction is associated with softness in the overall market and a portion is also associated with the significant recent appreciation in the value of the U.S. dollar. We would note that market shares are holding firm or improving in our key products and markets, and the major impact is associated with the external economic environment. FPEG revenue is now expected to decline in the range of 16 to 18% for the full year. This reduction is associated with overall market declines, including significant declines in consumer film, along with modest declines in entertainment imaging related to customer concerns in and around Screen Actors Guild contract issues. We also expect total company revenue to decline 6 to 10% for the second half and to decline 3 to 5% for the full year. The company now forecasts second half of 2008 EFO results to be in the range of $275 to $325 million, which translates into $200 to 250 million for the full year. This compares to the previous guidance, which was to be at the lower end of a $400 to 500 million range. The primary factors resulting in this revised guidance are overall macroeconomic and market-driven softness in overall revenue across both the company's digital and traditional businesses, along with accompanying pricing and mix in foreign exchange effects, thereby reducing gross profit percentage in dollars. With respect to taxes, the impact of the IRS refund and valuation allowances make the P&L effective tax rate less relevant for 2008; we do, however, confirm that our cash taxes are still expected to be in the range of about $150 million for the year. With respect to cash generation, despite the challenging economic environment, the company expects to achieve in excess of $500 million in cash generation before dividends for the fourth quarter. Factors impacting the current cash outlook are earnings-related reductions associated with revenue softness and gross profit declines across the business, a change in cash from intellectual property arrangements, including an agreement reached in 2008 for which cash will be received in 2009, and a reduction in proceeds from sales of real estate. Overall, as stated earlier, we will continue to focus on those things under our control, such as growing our key digital businesses, aligning our cost structure to reflect economic realities, keeping a tight discipline over capital spending, continuing to improve cash and working capital performance, and maintaining a healthy balance sheet. We are confident we will weather this current economic environment and emerge as an even stronger company. Thanks very much, and now Antonio and I would be happy to take your questions.

(Operator instructions). We will go first to Jay Vleeschhouwer with Merrill Lynch. Jay Vleeschhouwer - Merrill Lynch: Thanks, good morning. Frank, could you walk us though the accounting for the IP licensing first, that is question number one. At the end of '07 you had about $350 million in deferred bear, $430 million at the end of '08, second quarter of '08, and now just $15 million according to the Q, so help us understand that reduction in deferred, the VFOE conditions you met for taking the amount of up-front revenues you did in Q3 for IP, and how you still get the $250 to 350 million per year for the next number of years. Then a couple of follow-ups, thanks.

Keep in mind that the deferred revenue account is all the deferred revenue, particularly associated with IP, but there was a long-term arrangement obviously that we now reached an agreement for in the third quarter of 2008 that required us to reduce the gross amount of the liability and record the amount of profitability in the third quarter, net of all the items that are disclosed in the 10-Q, including various fees and other deferred revenues associated with that amount. So it was a long-term agreement which has now been translated into resolving that agreement in the third quarter. And so the total amount of the deferred revenue is reduced and results in the net amount, net of fees and other reserves, to the amount that you have seen in the 10-Q of $112 million. Jay Vleeschhouwer - Merrill Lynch: Secondly, could you be a bit more specific about the incremental cost reductions and operational improvements you will be making? Can you talk about that in terms of any functionaries of the company, product lines, or business units? We have talked, for example, about your need to materially consolidate your portfolio in GCG, like some of your other prepress competitors are doing; could you just elaborate on that, please?

Well, first of all, I would just point out again that we know how to do this really well in terms of cost reduction. In the third quarter, I want to reiterate what was in the release, the fact that we reduced SG&A costs by $61 million on a year-over-year basis, and brought the SG&A as a percent of revenue down by over 1.5 percentage points. In the current environment though, we believe that it is prudent that we continue to take another look at our overall cost structure across the organization in all facets, in all regions, and we believe that there are additional opportunities that we can pursue in the near term to further bring down the overall cost structure up and down the balance sheet, COGS, SG&A and R&D, and so we will be pursuing that fairly aggressively. Jay Vleeschhouwer - Merrill Lynch: Alright, but you are not prepared to say at how much savings you are potentially going to get?

How much savings -- Jay Vleeschhouwer - Merrill Lynch: From the additional reductions in the business.

Not at the current time. We are going to give more clarified guidance for 2009 once we get to our investors meeting in February and we have got more clarity around that. Jay Vleeschhouwer - Merrill Lynch: Alright, and lastly, in light of the environment and your conscientiousness around cash and so forth, are there any growth programs that you are having to scale back in some way? For example, you had talked about accelerating investments in Stream to bring that to market more quickly, investments in consumer inkjet to double or triple your volumes this year and again grow that business next year. Is there anything you have not scaled back in any respect?

Jay, no we are not going to change what is fundamental to the strategy of the company, but we will scale back in what is not so much of the heart of our investments. So there are opportunities that are part of the present plan that could be scaled back without touching, as I said in my presentation, the key elements of the strategy of the company, which will be repeating. You mentioned those two, obviously consumer inkjet and Stream. Fundamental, we actually increased investments this year because we believe that there is an opportunity for the company. We can accelerate the progression of those businesses and we will do that. We will not change that plan. There are other things that we can change though. We have a lot of product lines that they are although important, they are not as important as the key product lines that will define the future of the company. And those are the tradeoffs that we will be making. We do not have a number but we know that that since we are going to take a prudent view of Q4, and obviously what we know about Q4 is what about Q4. I mean the two key elements that are going to define Q4 are going to be Thanksgiving and then Christmas, and it is hard to judge what they are going to be like, so therefore we thought that the right thing was to be was to be prudent about it, and this is the way we are going into it. And then for looking into what happens during the fourth quarter, we will have a prudent plan for 2009. So we already have a plan for 2009, that plan is going to be revisited as we go through the fourth quarter. And then we will align the construction of the company to the new top line. That will have impact in targeted positions that will be decided by each business and each function because we think some business will have much better projections for 2009 than others, and that is the way we will make those cuts. And we will be ready to share this with you in February. Obviously we will be on them before the end of the year, but we will have the opportunity to share this with you in February. Jay Vleeschhouwer - Merrill Lynch: Thank you.

Thanks.

We will go next to Carol Sabbagha with Barclays Capital. Carol Sabbagha - Barclays Capital: Thanks, just a couple of questions around cash flow. It looks like your new cash flow guidance for the year versus where it had been in the last quarter is about $650 million incremental a negative versus where you were thinking. Can you talk about the components of that difference? I mean, we are estimating given other guidance you gave that maybe it is about $200 million from lower earnings, $100 million from lower asset sales. Does that leave me with $300-plus from lower licensing or are there factors that I am missing there?

Let me help you a little bit with that, Carol. So your order of magnitude on the reduction is in the right range, so let me start off by saying this: One, we have got an estimate which we think is a prudent, realistic estimate based on what we know today for the rest of the year. On the specifics, you are correct. A large chunk of that is due to the change in the earnings estimate. Number two, part of the change is due to the IP licensing agreement that was achieved in the third quarter for which we will get cash next year. We are not giving a specific number around that but the number is higher than the number you see that was recognized in the income statement for the third quarter. So it will be higher than the $112 million, we are just not going to get more specific than that right now. But that will be received definitely in 2009. The other piece is lower proceeds from asset sales, as you said, and those are the three major pieces. Then we have got a variety of other items across the assets and liabilities on the balance sheet where we see changes in various accruals and provisions and that really makes up the difference without going into specifics right now for a variety of reasons, and some modest changes on some various depreciation amounts. So that is what really yields the total change, but what we will say is obviously between now and the end of the year and into 2009, we are going to continue to pull the levers that we have been pulling to get as much in the way of cash generation as possible. That is going to include continued improvements in collection of past due receivables, streamlining the supply chain and our SKUs to really bring down inventory levels, and then continuing, or really completing, our efforts to bring our accounts payable performance and accounts payable terms in line with the best of our peer group. And so we will pull every lever we can. That is just the guidance we are giving right now based on what we know today. Carol Sabbagha - Barclays Capital: Okay, and sticking with cash flow for a bit, I know it is still too early to give '09 expectations for that, so I am not going to ask that. But let's say the economic environment continues to be challenging throughout '09; would you be willing to pull back on investments to ensure that you have positive free cash flow for next year -- net cash generation after dividends and all that?

Carol, we are not going to play with scenarios. There are all sorts of scenarios, so I think the right thing for us to do is to see what the fourth quarter is like and then we will be much better prepared to give you that. We think we can be positive cash flow for 2009. We will see what Q4 gives us. Now one thing about what you said about the IP. We do not consider that lower royalties, as you referred to that delay of cash as lower royalties. So let me go back to the IP and I keep saying that it is very difficult to give you a forecast for IP deals because everyone is just a different deal. We said that for the period of four years, I felt very comfortable saying that at least we will get $1 billion to $1.2 billion for the four-year period, which will be an average to $250 to 300 million per year. It is very hard when you make these deals to know when the earnings and the cash is going to come. This is actually the first time in which we had difficulties getting the cash during the first year, and this is due to many things including the environment that we are going through. These are hard negotiations and we do what we think is best for the company. Obviously we would have liked that cash to come this year; we could not make it happen. So as far as the IP program, I am extremely happy with the IP program, with the results. We are very much along the lines that I just described of making that at least $1 billion or $1.2 billion for the four years, about an average of $250 to 300 million per year, and so that is the way we will look at it. And we have a lot of work to do still for that. Now on the other questions you asked me to speculate on certain conditions and give you a number for next year, we can not do that, we should not do that. Obviously we have to see what the fourth quarter is like. A lot of things will affect the fourth quarter, and depending on how the fourth quarter is, you could affect it for the next year or two. Things like what kind of inventory do you end up with, and what kind of price pressure did you see in the first quarter, all sort of things. I thin we need to get deeper into the fourth quarter to give you any reasonable forecast that will have any value. Our intention is to have positive cash flow next year. Carol Sabbagha - Barclays Capital: Got it, okay. Thank you. And then one last quick question. You did raise your restructuring actions in the fourth quarter; would you be willing to take even more additional restructuring actions like other companies have and may take due to the economic environment?

Carol, I think that we are absolutely bound and determined to make sure that we align our cost structure with our business going forward and with the economic realities and I think if you look over the past four years, the company did quite a bit to really bring the cost structure into what is required to be a digital growth company. That said, we just said look, we've got some additional opportunities for rationalization this year, and going forward we will be looking at this every quarter and every month to make sure that we have got our cost structure aligned with internal and external realities. So the journey never ends. There is always opportunities to get leaner, and we think that -- I guess the good news is that as we accelerate and intensify these actions now will result in our being a stronger, leaner company as we come out of the economic difficulties. Carol Sabbagha - Barclays Capital: Thank you very much.

Thanks.

We will go now to Richard Gardner with Citigroup. Richard Gardner - Citigroup: Thank you. Frank, I wanted to ask you about commodity prices. We have obviously seen pretty sharp declines in silver, aluminum, and oil since July, and I am just wondering how quickly we can expect those to start flowing through the P&L. Have you hedged a lot of that way for the fourth quarter or will it be a significant benefit beginning in Q4? And then one follow-up.

Okay, good question. I think we have put on some hedges during the year, so our current outlook for the fourth quarter as it relates to silver and aluminum is we are probably still looking at what I will call a low double-digit impacts in the fourth quarter as compared to the prior year. As it relates to oil, we do believe that there should be some positive impact as all the resin-based materials and the transportation costs and those things impacted by oil work their way though the supply chain in the fourth quarter. I do not know how much that is, but we would expect some time later in the fourth quarter, and of course into next year, if prices stay the way they are, that we should start seeing a benefit from oil. I would keep in mind, however, that on a year-over-year basis, oil is not a whole lot different than it was in the fourth quarter of last year. So you will see sequential improvements in the cost structure versus Q2 to Q3, but on a year-over-year basis, even the oil is going to be pretty modest. Richard Gardner - Citigroup: Okay, and Frank, when you say low double-digit impact year-over-year on silver and aluminum, that is low double-digit millions of dollars' impact?

Yes, and that is roughly in line with what we saw in the third quarter. Richard Gardner - Citigroup: Okay, and how about a sequential discussion on silver and aluminum.

Sequential Q3 to Q4? Richard Gardner - Citigroup: Yes.

Again, since the year-over-year impact , there was not a lot of change between Q3 and Q4 of last year, so the sequential impact, it will be roughly in line, Q4 roughly in line with Q3. Richard Gardner - Citigroup: Okay, and then the follow-up has to do with the price increases that you talked about taking on certain products like plates last quarter. I am just curious if you intend to move forward with those price increases or whether you are reconsidering given the recent trends in commodities?

Most of the price increases, Richard, were in our analog plates, and we will continue with those. That is a decline in business. We obviously looked for the areas where we could put price increases and we will continue with those. Those are markets that are already declining and that we are managing for cash. We are very competitive with our pricing. We were already very competitive with our pricing in digital plates and we are gaining shares through our knowledge. And same with all the digital products. We already have, from the beginning we have a portfolio that was really competitive in price and we don't have any specific plans to increase prices in our digital product. We do have plans to continue to increase prices in our declining products. Richard Gardner - Citigroup: Okay. Thank you.

We'll go now to Shannon Cross with Cross Research. Shannon Cross - Cross Research: Hi, thank you for taking my question. The first question is just on the ink jet business. I'm curious with your new expectations, what are you thinking in terms of unit volume? Are you still holding to the 1 to 1.5 million? Is that baked into fourth quarter?

We haven't changed our plans. We haven't changed our plans, Shannon. Of course we are concerned about Thanksgiving and Christmas. And so far, and you probably know this, the overall inkjet market has been going down and we've been growing very significantly. So that's the good news. How much the market is going to decline during the rest of the year I can not make a judgment. So, so far, we keep the same numbers. That is our intent. And we'll see how the fourth quarter goes along. Shannon Cross - Cross Research: Okay. And then, you've obviously -- it sounds like, at least from the announcement, and I know you're not talking specifics but it sound s like a renegotiation of the Motorola contract. And I'm curios as to how that plays into your CMOS business. You didn't mention CMOS on the call. So is that one of the areas where you might be pulling back from investment, or how do you view CMOS?

What is the question, Shannon? The first thing was a statement; I don't know how to answer a statement. So why don't you-- Shannon Cross - Cross Research: The question that I ended with was, how do you view CMOS, and is it one of the areas that you're pulling back on?

No. CMOS is an important area for us. It will -- we've been looking all along for a way to -- in the semiconductor business, time to volume is time to money. So we've been looking along for ways to go for volume increases as rapidly as we can. And that is our plan. Shannon Cross - Cross Research: Okay. And then, just one more question on the IP licensing. How should we think -- you signed Nokia, which I know there are no details given. But you signed Nokia. Can you confirm, with that, did you get any money in for third quarter? I'm just trying to make sure all—that I've got the various pieces correct in terms of the various puts and takes of whom--

Actually, Nokia's a Q4 deal. So it's not included in the third quarter. Shannon Cross - Cross Research: And Nokia will incur ongoing, recurring revenue as well?

We can not disclose that. We're not allowed to through our deal with Nokia. All we can say is what we say in the press release, that we have an agreement, that it's a good agreement for both companies and that it will pay an amount to us. Shannon Cross - Cross Research: Okay, great. And then the last question is just on cash. Can you talk a little bit about, maybe Frank, your comfort level with how much cash you need to have, net cash to run the business? And how we should think about your commitment to dividends? Obviously it sounds like a pullback on share repurchase, but think about acquisitions and dividends and just cash usage overall. Thank you.

Another statement, there.

Our overall posture on the minimum cash required, we've always said we want at least $ 1 billion and minimum cash balance, particularly because of the seasonality in the first half of the year. At least for the near future, as we grow our consumables business. We have -- there's no change to our dividend policy. As we sit here, no change at all. And I guess that would be our position. Shannon Cross - Cross Research: Okay, thank you.

We'll go now to Ananda Baruah with Banc of America. Ananda Baruah - Banc of America Securities: Thank you for taking the question. I was just wondering, it seems as though your December quarter guidance implied year over year margin increases, which would be a change from what we've seen the first two quarters of the year. And I guess I'm just wondering if you could walk through why we should expect that. I believe you have lower expenses in some areas this year, operating expenses, like consumer ink jet. Not really operating expenses but you had I guess a large increase in investment in Q4 last year as well as in entertainment imaging, but it sounds like some of the other things could serve as, maybe you had been counting on serving as I guess tail winds such as new products, so your cost absorption probably aren't going to play through the way you expected it to. And the commodity pullback doesn't sound like it's going to be a great help. So I'm just wondering if you can bridge what's gone on, on the margin front the last few quarters relative to last year to what seems to be implied in the December quarter guidance.

Yes. I don't want to get too much into specifics for you in terms of specific margins and individual businesses for the fourth quarter, but you know what all the various significant elements that usually play into our fourth quarter margins and CDG and GCG and FPEG. On a sequential basis, obviously there's always an uptick because you do get the benefits of absorption from the higher volumes later in the year as compared to earlier in the year. And if you look back in history back to 2007 obviously, in 2007 we had licensing deals, to the extent we had nonrecurring licensing deals last year, those nonrecurring deals were in the back half of the year. And in various years that has been the occurrence. Other than that, we've got significant, as you pointed out, significant incremental cost targets that each of the businesses are trying to pursue and COGS and SG&A and R&D and those are the kinds of things that are going to help us on a year over year basis improve our EBIT margins. Ananda Baruah - Banc of America Securities: And Frank, how conservative -- you mentioned that you believe you're taking a prudent outlook to the December quarter guidance. Can you give us some sense of what type of conservatism is really baked into it? I mean, certainly headwinds have obviously increased for everybody.

Basically what we've done, this is Antonio, is that we took units out of the plan. We took hundreds of millions of revenue out of our manufacturing plans. Obviously we went pro line product by product, we understand very well what the sales through has been on those products in the last few weeks. So we know. And we talked to our partners in the retail arena and we have an idea of what it could be. So we don't want to end up in Q1 with a bunch of inventory that we didn't sell. Then we'd have to reduce in price by a lot. That is the biggest element. We haven't reduced our activities in the field. We actually are focused in the field in the orders that we can get and in the orders that we can get paid for. So we put a lot of emphasis on this. And natural things that drive the business, make sure that we get the orders that are closer, and make sure that we can install them and get paid for it that is in the commercial space, but we cut as well the number of parts. We started to cut the number of parts that you have to buy for the volume that we think we're going to need. It was a difficult decision, but I think it was a prudent one to do. And we're talking about hundreds of millions of dollars that we took out of the units that we're going to manufacture. That is basically the approach. Plus the focus of course we started with cost control about two months ago. We've done all sorts of internal things to reduce costs, a lineup of things that I'm not going to repeat. But those are the three things that we've done. Ananda Baruah - Banc of America Securities: Okay, thanks. And I guess just one last one on the consumer ink jet. Are you guys able to track with any degree of precision who actually is buying the ink jet printers? You've done a little bit of discounting here and there through 2008. Is there any concern that maybe folks have been picking some up, some of the folks that are not in your target market are picking some up that might not ultimately end up doing the amount of printing on the devices that you hope they might?

Well, that might have happened. But if it happened, was not intentionally. The thing that I look like at the end is what is the burn rate? As long as the burn rate, which it still is, double the average of the industry, as long as we keep the burn rate at that level, then we're selling to the right people. But it is true that in some cases even in order to keep your position in the store we have to do promotion programs. Because our competitors are incredibly aggressive, especially against us, because we have a very attractive proposition and we tend to attract the customers that they want the most. But I would say that sometimes we probably sold to people that were not the original target. But you know, the ultimate measure, though is what is the burn rate. And the burn rate I can confirm as of last time we checked it was about a month ago and it was slightly more than double the average of the industry. So we're doping pretty well with the target customer. Ananda Baruah - Banc of America Securities: Okay. Thank you.

We'll go next to Joan Lappin with Gramercy Capital. Joan Lappin - Gramercy Capital: Good morning everybody.

Good morning. Joan Lappin - Gramercy Capital: I have a few questions. If your book value is above 12, when your stock gets below 10 it would seem to me that would be an incredibly excellent use of your cash. Maybe not the whole billion, but some portion of it. So the implication of your statements today is that you have stopped buying. So I just wonder if--

No, we didn't say that. Joan Lappin - Gramercy Capital: Okay, well then would you clarify that, please, then for me?

We told you exactly what we bought in the third quarter, and— Joan Lappin - Gramercy Capital: And you said you said you (inaudible) to announce at the end of each quarter.

And yes, well, that's what we said from the very beginning. Joan Lappin - Gramercy Capital: Right.

That's what we said from the very beginning. We don't want to tell the shareholders when we're going to buy, when we're not going to buy. We'll buy when we think it's -- when we think we can get the best value for the shareholders. We will buy some in the fourth quarter. I can assure you of that. Joan Lappin - Gramercy Capital: Okay. Because it looks like on balance you paid just over $15.

Well, we were buying at the very beginning. We should have waited a little bit, unfortunately. Joan Lappin - Gramercy Capital: Well , who knew. We all should have waited.

That's right.

: No. We haven't said that we're not going to buy. But we -- I think we all know how precious cash is, and we really don't know how bad this is going to get. We don't -- the fourth quarter is critical, and we don't know how bad it's going to be. So I think we should be prudent. That's all. Joan Lappin - Gramercy Capital: Now, on -- it looks like you're cutting pension costs, or there's some line on there about post employment benefits or something. Can you explain exactly what you're doing there?

Yes. As it relates to the impact on the third quarter, Joan, as we announced just after the second quarter release, we took some actions related to post-employment benefit costs. And that actually creates a “triggering event,” in an accounting parlance. Because of that obviously we have a reduction, a significant reduction in the liability that was the $919 million. That 919 was made up of two pieces. The vast majority of the piece was related to the changes in the benefits. There's a smaller piece that had to be done that was a benefit because on a triggering event you have to update all the interest rate assumptions and adjust the liability on that basis. And that was the remainder of the 919. Because of the change in the liability, that created an accounting event called the “curtailment benefit,” which was the one time amount of $94 million which impacted the third quarter. And that obviously did not create any penny cash benefit, it just went to the P&L below to the segment EFO line. What we're saying going forward is that beginning in 2009, there will be some amount we haven't specified the amount yet, we'll clarify that later, but there will be some amount that will be a benefit to both the P&L and cash flow starting in 2009 as a result of these changes in post employment benefits. Now on the pension side, because of some actions we've taken -- overseas there was an event where we had to actually revaluate the value of some of our overseas pension plans outside the US. That resulted in a benefit of over $300 million on the liabilities associated with some of those plans. So when you look through the 10-Q, you'll actually see that for plans which are classified as unfunded or under funded plans which had a balance of 3.4 billion previously, the new balance at the end of September is about 1.9 billion for an improvement of 1.5 billion. And the vast majority of that is this OpEx change and this change in overseas plans. Joan Lappin - Gramercy Capital: Okay. So essentially, what are you doing to these retired people? What are you cutting away?

We made an announcement earlier in the year that adjusted certain items, and so we'll just stick with that announcement. Joan Lappin - Gramercy Capital: Okay. Now, I know the other person -- I was very pleased to see you made a deal with Nokia, because the Motorola deal if you hadn't renegotiated or you didn't, we can see by what they announced today, they're fading out, fast. So when do you think that significant sales of these CMOS sensors could -- I thought the original target was the second half of next year. Are we able to stick with that target as to when the CMOS sensors start to become a revenue and earnings contributor? Or must we--

That is the target that we put for ourselves for a significant increase in volume. And that still is the target, Joan. Joan Lappin - Gramercy Capital: Okay. So you haven't had to -- no alterations in that.

No. Joan Lappin - Gramercy Capital: And then my last one is Stream. I know you've said already that you're not reducing any of your investments there, but you have said that you have had cancellations and push outs on orders, which is not surprising, because those are sizeable. And you've also said several times in this call about making sales for which you “can get paid,” which is not a laughing matter when things are as they are.

You bet. Joan Lappin - Gramercy Capital: To what extent do these sizeable purchasers -- when you're buying in million dollar-plus units -- how much are they looking to you to fund that and to provide them financing? And how are you dealing with that aspect of things in the current world?

Okay. First of all, the cancellations or the delays that was not referring to any of the Stream products that we're going to sell during 2009. Joan Lappin - Gramercy Capital: Okay.

That was more the other type of equipment that we have, digital presses from VersaMark as well as the plate servers and things of that nature. Those are the ones that we felt that -- our customers they lost the enthusiasm when they saw the market coming down and everything coming down. In most cases we'd like to believe we didn't lose the sale yet, they eventually will come back. But some of them have been delayed and some of them they used discretion that they're going to cancel it for now, which I think is a kind of a joke. For me it's a cancellation but for them it's canceling for now. But that did not affect Stream. Customers in many cases now they are coming to us for help in the purchase of the equipment. So we have commercial loans -- let me pass this to Frank. Frank will tell you what we are with our commercial loans

And where we can, we actually have financing partners that assist us in that regard. You know who some of the larger players are. And we try to serve as an intermediary to help hook up financial institutions with some of these buyers. In some cases both the consumer and the commercial business we'll provide some capital. We have an amount that we write down each year in our CapEx, segregated, allocated amount. I'd say this year we've probably spent a little bit more than we planned to for the year, but we found offsets in other areas of capital spending where we don't think we need to put as many hard assets in place in the current environment. So we do some of that. But it's a combination of things between ourselves and outside financial institutions.

But there is the liabilities and the ability to get paid is obviously getting more difficult. So we are more careful with what customers we get involved with. Absolutely. Joan Lappin - Gramercy Capital: And good luck as you go forward here in a tough environment.

Thanks.

Thank you.

That concludes the question and answer session today. At this time, Mr. Perez will turn the conference back over to you for any additional or closing remarks.

I'm going to thank you all for coming to the call. This is obviously a difficult environment as you all said. We are focused on our core strategy. We will not deviate from our core strategy. Our key products are doing well, they're well-positioned and we're going to focus on those for the fourth quarter. That's the best thing that we can do. And we're going to take very rapidly actions to align our core structure to the new economic realities. That's the summary. Thank you very much.

This does conclude today's teleconference. You may now disconnect, and have a great day.