Michael Hara - VP of IR Jen-Hsun Huang - President and CEO Marv Burkett - CFO

Shawn Webster - JP Morgan Mark Edelstone - Morgan Stanley Daniel Ernst - Hudson Square Research Doug Freedman - AmTech Research Tayyib Shah - Longbow Research Pranay Laharia - Deutsche Bank Dan Morris - CIBC World Markets Peter Karzaris - Citigroup Michael McConnell - Pacific Crest Devan Moodley - Scotia Capital Robert Dennison - UBS

Good afternoon and thank you for holding. I would now like to turn the call over to Michael Hara, NVIDIA's Vice President of Investor Relations. Sir, you may begin your conference.

Thank you. Good afternoon and welcome to NVIDIA's conference call for the third fiscal quarter ended October 29, 2006. On the call today for NVIDIA are Jen-Hsun Huang, NVIDIA's President and Chief Executive Officer; and Marv Burkett, NVIDIA's Chief Financial Officer. Before we begin today's call I would like to take care of some general administrative items. Your lines have been placed on a listen-only mode until the question-and-answer segment of today's call. During this call we will discuss some non-GAAP measures about net income, net income per share and gross margin and other line items from our consolidated statements of income when talking about our results. You can find a full reconciliation of these measures to GAAP in our financial release, which is posted on the Investor Relations page of our website at www.nvidia.com. This call is being recorded. If you have any objections you may disconnect at this time. Please be aware that if you decide to ask a question it will be included in both our live transmission as well as any future use of the recording. Also shareholders can listen to a live webcast of today's call and view our financial release at the NVIDIA Investors Relations website. The webcast will be available for replay until the company's conference call to discuss its financial results for its fourth quarter fiscal 2007. During the course of this conference call, we may make forward-looking statements based on current expectations. Forward-looking statements, including statements as to our fourth quarter 2007 outlook, a review of the stock option practices by our audit committee, the restatement, the use of non-GAAP measures, the benefits and impact of the acquisition of PortalPlayer, new and forthcoming products, our products and technologies, growth drivers, market share, Windows Vista, PlayStation 3, design wins, strategic focus, and customers and partners pertain to future events, and are subject to a number of significant risks and uncertainties. The company's actual results may differ materially from results discussed in any forward-looking statements. For a complete discussion of factors that could affect the company's future financial results and business, please refer to the company's Form 10-K, an annual report for the fiscal year ended January 29, 2006, quarterly reports on Form 10-Q, and reports on Form 8-K filed with the Securities and Exchange Commission. All forward-looking statements are made as of the day hereof based on information available to us today. And except as required by law, the company assumes no obligation to update any such statement. The content of the webcast contains time sensitive information that is accurate only as of November 9, 2006. Consistent with the requirements under Regulation FD, we will be providing public guidance directly in the conference call and will be unable to provide significantly more information in off-line conversations or during the quarter, therefore questions around our financial expectations should be asked during this call. At the end of our remarks, there will be time for your questions. In order to allow more people to ask questions, please limit yourself to one question. After our response we will allow one follow-up question. As previously announced in June 2006, the Audit Committee of the Board of Directors of NVIDIA began a review of the company's stock option practices based on results of an interim review voluntarily undertaken by management. The Audit Committee's review covered the time from the company's initial public offering in 1999 to the current fiscal year, and as previously disclosed, found instances of the use of incorrect measurement base for certain option grants. The Audit Committee is being assisted by independent legal counsel and outside accounting experts. At this time, the Audit Committee has completed its forensic review of the option grants, is now working with the company's management to finalize the financial impact of using incorrect measurement dates. NVIDIA will publish the balance sheet as of the end of the third quarter and the statement of income for the nine months ended October 29, 2006, as well as restated statements of income for the comparable periods of fiscal 2006 as soon as practical upon completion of the Audit Committee's review. The company's current and former independent registered public accounting firms have not completed their review of the findings of the Audit Committee. Our financial results for the second and third quarters of fiscal year 2007 are not audited and may change as a result of the ongoing Audit Committee review. The stock option practices under review and related matters can also lead to the potential claims and proceedings relating to such matters, including litigation or action by the Securities and Exchange Commission and/or other regulatory agencies. I'll now hand the call over to Jen-Hsun. Jen-Hsun Huang: Thanks, Mike. Good afternoon and thank you for joining us. Today, we are pleased to report record revenue of $820.6 million for our third quarter. This is our third consecutive record quarter. Year-over-year, third quarter revenue grew nearly 41%. Our growth was driven by strong performance and share gains from numerous product groups -- desktop GPU, notebook GPU and MCP, resulting in record revenue for the quarter that is well above normal seasonal patterns. Let me review the highlights and achievements for each of our business units during the quarter. Our desktop GPU business continued to deliver strong results in Q3. In addition to the seasonal strength of the PC market, we increased our desktop GPU share 5 points to 56%. GeForce achieved 89% share of the performance segment. Our desktop GPU revenue grew 13% year-over-year. With over 265 media awards worldwide in Q3, demand for our GeForce 7 series GPU remained very strong, even as we launch our next generation GPU. Yesterday, we announced GeForce 8800 to the world. Held in secrecy for four years and code-named G80, this is the most ambitious undertaking in our history. G80 is the product of hundreds of the world's best engineers, over 1,000 man years of effort, and over $400 million to develop. G80 is a revolutionary architecture and a completely ground up design. This is only the third fundamentally new architecture in our 13-year history. The last fundamentally new architecture was GeForce 256, the now famous GeForce introduced in 1999. G80 is based on a unified shader architecture. Instead of a separate vertex and pixel shading processors, G80 has 128 stream processors operating at 1.35 gigahertz that can process either vertex or pixel shaded programs. With a unified architecture, G80 can adapt its vast computational resources to the changing vertex or pixel shading workload from team to team. G80 is the world's first DX10 GPU. DX10 is a major new API for Microsoft Windows Vista, and includes many new important features. One of the most exciting DX10 and G80 features is the geometry shader. By programming the unified shader processes of G80, designers can programmatically create, destroy and manipulate geometric mesh. Game designers can do amazing things like procedural geometry to programmatically generate landscapes, particle systems to create realistic looking smoke and clouds, displacement maps to create incredibly high geometric modality, fast environment mapping, and even motion blur. Yesterday, we also announced CUDA, a new mode of operation on GPUs where the massive computational power of the GPU can be utilized for computation intensive applications. We envision CUDA enabling PCs to solve problems traditionally solved on supercomputers and custom ASICs. This breakthrough architecture is complemented by another first, the NVIDIA C-compiler for GPUs. We envision CUDA will open a whole new field called GPU computing, providing for engineers and scientists and digital content creators tools they need to solve computation intense problems. The performance of GeForce 8800 is simply awesome. A single 8800 GTX is twice the performance of our 7950 GTX, our previous flagship GPU. In fact, 8800 GTX is faster than two 7950 GTX and SLI. GeForce 8800 GTX is also a breakthrough in power efficiency. Although 8800 GTX has twice the performance and tons more features, the power is just a bit higher than 7950 GTX. Its on architectural efficiency and low-power design has really paid off. The GeForce 8 architecture is twice the performance per watt of GeForce 7. The most exciting news about GeForce 8800 is that it is available in stores now, and will soon be shipping from nearly every PC supplier around the world. Our notebook GPU business achieved a major milestone in Q3. We achieved record revenue for the third consecutive quarter, and grew shares at 52%, and became the number one notebook GPU supplier for the first time in our history. Our notebook GPU revenue grew 47% -- 46% quarter-over-quarter and over 100% year-over-year. We expect our share gain to continue through the year, and then accelerate as we ship design wins based on Intel's Santa Rosa platform. The nForce MCP product line achieved record revenue for its eighth consecutive quarter. The MCP business doubled in revenue from the same quarter of last year, and grew 33% sequentially from Q2. Market Research now ranks NVIDIA the second largest PC core logic supplier with 17% of the total volumes and 61% of all AMD core logic. Our AMD share grew 9 points and our overall share grew 5 points. Our MCP growth was driven in part by the increased adoption of our nForce notebook solutions by large PC manufacturers, including HP, Acer, Fujitsu Siemens and Gateway. OEMs have embraced our unique strategy of offering single chip MCP designed specifically to reduce space and power consumption. This week we were also pleased to have announced Dell shipping nForce products in their new AMD-based OptiPlex 740 commercial PC. These new Dell OptiPlex products are specifically offered to large corporations who demand the highest quality platforms deployed with stable software drivers designed to lower support costs. One of the major reasons Dell selected nForce was the high level of quality of our NVIDIA stable image software drivers that we developed as part of our NVIDIA business platform. NVIDIA business platform, or NBP, is the platform level commercial PC solution we introduced last year for smaller PC manufacturers, and have been adopted by over 100 companies in North America, Europe and Asia. This week we are extending our nForce products for Intel CPUs with the announcement of what many customers claim to be the best performance platform for Intel's Core2 Duo, and new Core2 Quad CPUs. Our new NVIDIA nForce 680i SLI MCP delivered top performance in Intel CPUs and are designed specifically for enthusiasts with features such as SLI, DualNet gigabit Ethernet and MediaShield RAID. A particularly exciting feature of nForce 680 SLI is its ability to allow the most enthusiastic of PC customers to over clock their CPUs, which offer the users the benefit of tapping into additional CPU performance. These new nForce 680i SLI products are immediately available from etailers and retailers. NVIDIA's Quadro professional business had another sequential strong quarter with shipments up nearly 25% year-over-year. Our professional business continues to be strong in all segments, particularly with new notebook workstation design wins with HP, and shipments for high-end workstation solutions and system products. In August at SIGGRAPH, we launched NVIDIA Quadro Plex, an entirely new category of professional digital computing solutions. Any SLI ready server or workstation can now support two external Quadro Plexes to build an 8 GPU graphic supercomputer solution. And when clustered, able to offer up to 25 times more graphics compute density than traditional data center solutions. We began volume shipments of Quadro Plex in September. Acceptance is strong in key markets like simulation, medical, styling design and oil and gas. It enables thousands of engineers and designers to experience advanced personal visualization solutions previously only accessible in large visualization centers. We also unveiled a new version of our Gelato 2.1 final frame film quality rendering software, which includes next generation features such as texture baking, enhanced raytracing performance, and improved lightening functionality for 3D rendering. To date, we have surpassed 70,000 downloads of Gelato. We anticipate putting this technology in the hands of many users will usher in a wave of new, high-quality rendered content. Our handheld GPU business achieved another record -- another strong quarter. We saw continued demand for DVB-H services, even after the initial demand generated by the World Cup. Our flagship DVB-H design wins, the Samsung P910 and P920 handsets have been adopted for further trials in Sweden and in South Africa. The launch of the first North American rollout of DVB-H services have been publicly confirmed by Crown Castle, who will launch the Modeo mobile TV services in New York City before the end of the calendar year. The HTC manufactured Modeo phone is powered by the NVIDIA GoForce 5500 GPU. During the quarter, we began shipping our first North American market phone, the iconic Motorola RAZR V3xx. Our handheld GPU will also power the upcoming Motorola RAZR MAXX, targeted at the international market. As you can see, NVIDIA has become far more than a PC graphics chip company. We are passionately focused on being the world's premier provider of visual computing solutions, whether it is on PCs or consoles, the most powerful image generators to miniaturized mobile devices. Let me turn the call over to Marv to discuss our financial results in more detail. I will return in a moment to highlight our growth opportunities.

Thanks Jen-Hsun. Today, we are reporting GAAP and non-GAAP P&Ls for both Q2 and Q3, as we do not believe the restatement that is in progress will have a material impact on our current fiscal 2007 P&Ls. We will not be able to report a balance sheet until the restatement is completed, although we will comment on select balance sheet items that we do not believe will be impacted by the restatement. I'm going to focus most my comments on Q3 results, but we have included both GAAP and non-GAAP P&L for Q2 as well. GAAP results for the three months ended October 29, 2006 show revenue of $820.6 million and net income of $106.5 million or $0.27 per diluted share. This compares to revenue of $687.5 million in Q2 and net income of $86.8 million or $0.22 per diluted share. The non-GAAP statement for Q3 removes non-recurring expenses of $42.6 million net of tax, which is comprised primarily of stock compensation expense, plus a one-time charge associated with the confidential patent licensing arrangement. This results in a non-GAAP P&L net income of $149 million or $0.39 per diluted share. Revenue for the third quarter, as I said, was $820.6 million. The quarter-to-quarter growth in revenue of approximately $130 million or 19% was composed of several business units which grew significantly. Year-to-year growth for Q3 was 41%. Desktop GPU grew $49 million quarter-to-quarter with most of that growth in the mainstream and performance segments. ASPs held flat in all segments. We had initial shipments of GeForce 8800, but it was not a big impact to revenue. Growth in GeForce 7 Series products accounted for almost all of the $49 million. As Jen-Hsun noted, notebook grew 46% quarter to quarter, and is now more than $80 million in revenue per quarter. All of this growth is in GeForce 7 series products. MCP continued its string of record quarters, and also grew by $48 million quarter-to-quarter, and is up by more than 100% year-to-year. Both professional solutions and handheld GPUs were slightly down in the quarter. Memory grew by $20 million quarter-to-quarter, and was slightly more than $50 million. Consumer electronics was relatively flat quarter-to-quarter, but we recognized our first royalties for PlayStation 3, even though it was at a very low level. On the gross margin side, GAAP gross margin was 40.7% in the quarter, including the one-time charge associated with licensing certain patents and the stock compensation expenses. On a non-GAAP basis, gross margin was 42.9%. The gross margin percentage was negatively impacted by the higher growth in the lower margin businesses, such as memory, mainstream, desktop GPUs and MCP. Each of the individual business unit continues to make progress in improving gross margins, but the overall margins were affected by the mix. The revenue increase in memory alone would account for almost a full percentage point reduction in gross margin. So despite what might appear to be relatively flat margins, we believe we are continuing to make progress in improving gross margins. I will only be able to comment on selected items on the balance sheet until the restatement is completed. We do not believe these items will be affected by the restatement. Cash at the end of the quarter was $1.174 billion, up more than $300 million quarter-to-quarter. Obviously, this is led by profits, but we also decreased both receivables and inventory. Accounts receivable were down by $20 million, and inventory was down by $5 million. Receivables now stand at $439 million and DSO for the quarter is at 49 days, which is down from 60 days in the prior quarter. Inventory was at $373 million and days sales in inventory were at 70 compared to 87 in the prior quarter. There was no stock repurchases during the quarter. Headcount at the end of the quarter stood at 3,627, which is up 200 from Q2. Of the 200, approximately 150 were added internationally. Year-to-year headcount is up by 1,033, of which 735 were international hires. I would like to give you an update on the restatement. We're making good progress and are receiving excellent cooperation from both PWC and KPMG. I wish I could give you a precise filing date for our restated and delinquent SEC filings, but we can't be precise at this time. We have an internal plan to complete the work before the end of the month, however, neither PWC nor KPMG has completed their work, and there are unresolved items. We're committed to re-filing as soon as possible. Now for the outlook. On the revenue side, because of our strong competitive lineup and new products, including the GeForce 8800, we expect revenue growth in the fourth fiscal quarter. The magnitude may be difficult to forecast, but we feel comfortable with 5% growth over Q3, even if memory declines. We expect growth in desktop GPUs, continued growth in MCP, and resumed growth in professional solutions. We expect handheld to be relatively flat and consumer electronics to be up slightly, but with increased gross margins. For gross margins, we expect continued improvement. While we may not achieve our internal goal of 45% by year end, we're comfortable with a gross margin increase of 100 basis points or more in Q4 from Q3. New products, including GeForce 8800 and the new MCP products, will help gross margin, and the incremental royalties from Sony will also be a benefit. Even though 44% gross margins might be admirable, we do not believe we're done. There are further improvements to be made and we're pursuing them. We believe that a gross margin of 45% in the near future is certainly not impossible. Operating expenses will increase in Q4 on the order of 3 to 5% as we continue to hire. We believe the tax rate will hold at 17% for GAAP and 16% for non-GAAP. We have not included any PortalPlayer revenue or expenses in this outlook. Depending on when the acquisition closes, there could be both revenue and expenses in our fourth quarter results. Now I will turn it back over to Jen-Hsun Jen-Hsun Huang: Thanks Marv. On Monday of this week, we announced the signing of a definitive agreement to acquire PortalPlayer, the pioneer of application processors for portable media players. Their products power many of the world's most recognized digital music players. Their processors also power the upcoming Vista SideShow, secondary display for notebooks. With this acquisition, we're combining the two essential technologies for next generation mobile devices, PortalPlayer's application processor and NVIDIA's handheld GPU. IDC predicts that the combined market for application processors and GPUs will grow to approximately $4.1 billion by 2010. Semiconductors that enable connectivity and multimedia features in handsets are expected to show the greatest growth over the next several years. We're very excited about growth opportunities for the year ahead. The reviews of our new products are fabulous. Let me give you a flavor. According to PC Perspective, and I quote, in my seven years of covering the world of PC hardware, no other graphics architecture shift has been as dramatic as the one we are seeing here today with NVIDIA's GeForce 8800 GTX. I am quoting Kyle Bennett at HardOCP, the EVGA nForce 680i motherboard is easily one of the best enthusiast motherboards I have ever used. The 680i NVIDIA reference motherboard will make it into my next system build no question asked. We expect a rapid production ramp of the new GeForce 8800 and NVIDIA nForce 680 SLI product families to drive Q4 growth. In Q4, we will also witness the launch of the most anticipated next generation video game console, the PlayStation 3. We expect our notebook GPU share increase to continue as we fully ramp our map of design wins. Our share increase should continue through the spring Santa Rosa cycle as we achieve an even higher level of success than Napa. We expect our Santa Rosa design wins to ramp in Q1. Q1 will also benefit from the continuing ramp of the 2.5G North American phone design wins in our handheld GPU business. And with the recent acquisition of AMD and -- recent combination of AMD and ATI, we are in a unique position to offer branded integrated graphics for the Intel processor market. Market demand for our product has been very high. We will respond to market demand and offer our first Intel integrated solution early next year. We expect this will significantly increase our addressable market for MCPs. Finally, we're about to experience the biggest combination of discontinuity to simultaneously impact our ecosystem in over 10 years. Next generation Microsoft DX10-based games, Vista, and high-definition DVD, each of these discontinuities by themselves significantly increase the amount of graphics processing power necessary to deliver a compelling end-user experience. As the adoption of each of these grow throughout the year and beyond, so will the need for next generation GPUs, like the nForce -- like the GeForce 8 family. It is very evident that 3D graphics and GPU is becoming an evermore essential part of our computing experience. Some of the most exciting and popular applications are enabled by 3D including Google Earth, Microsoft’s new Virtual Earth 3D, Apple's iTunes 7 uses 3D to elegantly rendered album covers. With this, they are providing 3D foundation for all future applications. We expect to all of them to many more innovative ways to use 3D. This is truly a great time to be the single most focused GPU company in the world. Thank you, and we would be happy to take your questions now.

(Operator Instructions). Your first question comes from the line of Shawn Webster with JP Morgan. Shawn Webster - JP Morgan: Good afternoon. Can you comment at all first off on any guidance you can give us on PortalPlayer, what you expect in terms of revenues, maybe a run rate and OpEx? And then I have a follow-up please. Jen-Hsun Huang: I guess the answer is no. First of all, the deal is not done yet. We have just signed a definitive and -- so it is probably too early to do that.

Yes, I think so, Shawn. It requires shareholder vote and we will see. We are very excited about acquiring them, but it does requires shareholder vote. Shawn Webster - JP Morgan: Okay. Maybe turning into the PC end demand environment, you guys are obviously gaining share. Is there any color you can give us on how you see PC end demand going in as we move through Q4 actually and maybe into calendar Q1? Jen-Hsun Huang: There is a whole lot of different dynamics that are going on. There is obviously Q4 is seasonally a large quarter. There are some concerns about this about this, but we are seeing that. Most of the PC OEMs that we work with and most of the channel are relatively comfortable with the transition at this point. Our biggest focus right now is just ramping GeForce 8800 and nForce 680. And the market demand for both products are incredibly high. And so, we're going to focus on ramping those products and that should be the focus of our growth drivers in the Q4 timeframe. Shawn Webster - JP Morgan: Okay. Thanks.

Your next question comes from Mark Edelstone with Morgan Stanley. Mark Edelstone - Morgan Stanley: First off, congratulations on another outstanding quarter guys. Jen-Hsun Huang: Thanks Mark. Mark Edelstone - Morgan Stanley: Hey, Jen-Hsun, you talked a little bit about Quadro Plex and that certainly is a whole new strategy for the company. Can you talk a little bit about the opportunities you see there, just maybe size of market and how we should think about that from a business model perspective as you go forward? Jen-Hsun Huang: Yes. First of all, Quadro Plex leverages of our SLI presence and our workstation presence and the vast amount of software that we developed over the years for workstation applications and SLI applications. Quadro Plex is an external stand-alone image generator that allows our customers to scale their rendering density by just enormous factors. The application, of course, is targeted within all of the same customer bases that historical image generators have gone into, in addition to desk side workstations that would have wanted image generator type capability, but does simply couldn't afford it. There has been several billion dollars worth of image generators that have been installed into the world over the last, I guess, decade and a half. All of those image generators still require quite a bit of maintenance. They're pretty outdated. They consume a great deal of power. And I think that replacing those over time is just going to be a really huge opportunity for us. Not to mention creating a whole new class of desk sized imaging workstations that weren't possible before. It is hard exactly for us to scope out how big the opportunities are, but it is quite significant. It is certainly several times larger than the workstation business it is today. And in combination with the GPU computing technology that we recently -- that we announced yesterday called CUDA, we think that these desk side image generators, or super computers by your desk, are going to be really interesting applications for us to grow into. The business model with Quadro Plex is based off of system sales. The configuration is proprietary. It is based off of SLI, and it goes with quite a large suite of software to enable scalability. And so we will sell systems through our OEMs. They're branded Quadro Plexes. We would also sell it through VARs, and it is also sold directly on our website to professionals who work directly with us. Mark Edelstone - Morgan Stanley: I guess it would seem like that business would have potential to be pretty chunky over time. Would that be your expectation? And if so, would you have visibility as the, sort of, backlog begins to build for that business over time? Jen-Hsun Huang: Our expectation is that it is going to be a very large business. I don't know exactly how large it is going to be yet. But I agree with you. It is going to be very chunky business. It should be a very significant business. The number of installation of image generators in the world, just thinking through that, large workstation companies use to -- multibillion dollar workstation companies use to serve that market. And so we're going to replace those aging image generators. We're going to create new categories of desk-sized super workstations. And then in combination with GPU computing, I think it is a whole new computing model that we are excited about. It is hard for us to guess exactly what it is right now, but I think it is going to be very large, Mark. Mark Edelstone - Morgan Stanley: Then just one last question on memory. As you were ramping up the G80 family here over the next couple of quarters, should we see memory going up, or do you think it can hold here at current levels?

I guess my feeling is that we hope it is down in Q4. That is our current expectation. We had to ramp up for the 8800 launch, but we don't anticipate that that goes up. Mark Edelstone - Morgan Stanley: Great. Thanks a lot. Nice job guys. Jen-Hsun Huang: Thanks Mark

Your next question comes from the line of Daniel Ernst. Daniel Ernst - Hudson Square Research: Thanks for taking the question. Just not looking for guidance on the PortalPlayer revenues, but just thinking about the opportunity there, how quickly could you realistically integrate your video graphics processing capabilities with their on-base SOCs? And then what are you thinking is the best opportunity there? Is it still where they have been focused on the stand-alone media players, or do you think it is the mobile phones? Secondly on that, how serious do you think OEMs are about adopting the SideShow technology? Jen-Hsun Huang: So, what I'm going to do is I am going to answer the question probably from a more strategic perspective. And the reason for that is because the deal is just not done. And any speculation about our businesses -- about their business and our combination of the business is just a little too premature. But I think if you look at it strategically we feel that future mobile devices will become more and more intelligent, would incorporate operating systems, will be multitasking, will support all kinds of rich media. And over the course of certainly by within the next ten years, these mobile devices are going to become amazing little portable computers that allows you to do everything that you can imagine a digital device to be able to do today, whether it is music or movies or television or Web viewing or 3D games, or whatever happens to be. And certainly well within the next ten years, this dynamic will happen, and these portable devices will become your most personal computer. And we expect that this is going to be when it all -- when these various dynamics come together, particularly as the rich operating system becomes available for these mobile devices, it is really going to become the second PC revolution and so we are excited from that perspective. The two really critical ingredients to enable this new era to happen is application processors in combination with GPUs. The baseband processor is innovating quite nicely. And I think that the technology is maturing, and the capability is certainly available on every single phone already, obviously. So where we need to innovate is application processors and GPUs, and that is reason why we are so excited about the PortalPlayer opportunity. How excited are people about SideShow? I believe they have a numerous number of design wins, and they are real OEMs, and they really, really, really going to ship with it. And the way I think about it is the utility to the end-user. How many of us frequently carry our notebooks around, and just want to quickly glance at the calendar or the time or send a very quick message or see a quick message? I think that all of us would like to do that. And so without having to boot-up and log in to your personal computer. And so I think this is a capability that is a real differentiator for the notebook. And if a cell phone has two displays and some of them have three displays, why shouldn't a notebook have a couple of two, three displays? Daniel Ernst - Hudson Square Research: Great. That is helpful color. And then just a follow-up to your new platform launch and your comments on GPU-based computing. Earlier this year at NAB, Sony and IBM showed off a prototype cell-based media server for the broadcasting industry, as video is recently going digital and not tape-based. Is that an area that since you would be computing with that platform on, or would you have GPU-based media servers? Jen-Hsun Huang: It is too early to tell whether we're going to compete or not. But I think is interesting is that there's a whole new area of computing that is just not well served today. Some people think that supercomputers ought to serve it. We all know that over the course of the last ten years there has been a drought of supercomputer technology. And the reason for that, of course, is it has been really the workstation and the PC era. Now the world knows that there is a -- we have a supercomputer crisis, if you will, that there are so many problems that are very, very data intensive, very computer intensive, but the innovation and the investment around supercomputers has really lagged over the years. We think that we can transform the PC into a supercomputer. This is a wonderful opportunity for all the entire PC ecosystem. And by adding a GPU with a technology like CUDA, we can turn the PC, with the addition of GPU computing, into a deskside supercomputer. You could do this obviously in a server configuration as well with a bunch of blades. And the applications for these are wherever all these supercomputers are required and where people are using FPGAs potentially, or even designing custom ASICs to do the intensive number crunching. So, I think this is going to be opening up a whole new era of new style of computing, and we call that GPU computing. Daniel Ernst - Hudson Square Research: Great. It sounds exciting. Thank you. Jen-Hsun Huang: Yes. Thank you.

Your next question comes from Doug Freedman with AmTech Research. Doug Freedman - AmTech Research: A quick one for you. Can you give us a little bit more color on the chipset business and what you're doing there to improve the gross margins? And where do you think you can take those gross margins over the longer term? If you could just describe the landscape of the chipset market that I think is changing quite a bit recently. Jen-Hsun Huang: I think gross margins could be achieved -- could be improved in a lot of variety of ways. The number one best way is architectural. And I probably prefer to keep them as trade secrets, but architectural efficiency, doing more with less or doing more through extreme high integrations, or whatever the technology is -- approach is very important, so architectural. The second thing is operational. We have to make sure that the products are built just in time to benefit from the lowest wafer cost. We have to make sure that the yields are as high as we can make it. The scraps are low as we can make it, and the quality as high as we can. People have always known that through perfect quality is your best way to improve profitability. And the rest of it, the market dictates. We don't set the price; the competition and the customers set the price. And so on our side have to make sure we develop products that the market really highly desires. And that is one of the advantages of nForce. Our brand, our nForce brand is really becoming, if not already, the number one brand of core logic. If you're somebody who cares about the performance and stability and the availability of the best technology on a motherboard, nForce is really your choice. And I think we have demonstrated that on both the Intel as well as the AMD platforms. Between the combination of great architecture, efficient architecture, operational excellence, and building brands that the market highly desires those are basically our approach. And we hammer on all three every day. Doug Freedman - AmTech Research: What do you see as the price trend in that marketplace? And then if you could give us an idea of when we can -- when you believe you'll see revenue from the Intel integrated solution? Jen-Hsun Huang: The pricing trend in core logic -- I don't know if there's a particular trend -- it depends on what products and what segments we launch at any given point in time. This quarter, we are launching our nForce 680i and the 680a, and both of them are targeted at the enthusiast market. They tend to have higher ASPs and so -- because we're ramping those products there's probably a good likelihood that we trend upward. It has a lot to do with what we introduce more than what is happening in the marketplace. With respect to the Intel chipset, my expectation is that we -- I guess the market's expectation, which is customers would like us to be in the marketplace by spring of next year, and we are working as hard as we can to do that. Doug Freedman - AmTech Research: All right. Great. Thank you so much. Jen-Hsun Huang: Thanks Doug.

Your next question comes from the line of Tayyib Shah with Longbow Research. Tayyib Shah - Longbow Research: Hi guys. Congratulations on the quarter. Jen-Hsun Huang: Thank you. Tayyib Shah - Longbow Research: In the past you guys have kind of restricted yourself to the high end of the Intel platform MCP market. Now you're talking about significantly expanding your footprint there. Can you maybe talk about do you see yourself going after the mainstream Intel MCP segment in a major way in 2007? And if so, how much of that changed approach was because of the AMD ATI merger? Jen-Hsun Huang: The answer to your question is yes. We're going to go after the mainstream part of the market with our GeForce and nForce branded integrated graphics. And that market is obviously very, very large. And the opportunity to us is now quite significant, and the reason for that is directly related to ATI being sold to AMD. Now there is really a void of a branded, integrated graphics supplier in the Intel market, and that is an opportunity that we have stayed away from because there were other players that were serving that market before. But now with DX10 and high-definition and Blu-ray video and Vista, the bar for graphics capability has gone up so high in just one year's time we believe that that raised bar, as well as the fact that there is now a vacuum because ATI has left that market, it is just a wonderful opportunity for us. This is just the perfect time for us to enter it. Tayyib Shah - Longbow Research: Okay .Then can you talk about the supply situation for graphics memory? How do you see that shaping up over the next quarter? And if Marv can put this in the context of gross margins, have you had to absorb some of our memory cost increase in the last quarter?

What was that last portion? I didn't hear that. Tayyib Shah - Longbow Research: Have you had to absorb some of the memory cost increase in the fiscal third quarter? Jen-Hsun Huang: I guess the first thing is the comment about the memory shortage. There is a memory shortage, or memory tightness. But the memory tightness is by and large alleviated at this point. But during the tightness we worked really closely with all of our add-in card partners and OEMs. And because we're such a close partner of all the memory suppliers, we have been helpful at helping them secure the memories that they needed in a price that was fair to the marketplace. We were frankly very, very helpful to the graphics ecosystem to help them secure memories during Q3. But I think the shortage is by and large stabilized at this point. Tayyib Shah - Longbow Research: Thank you

On the comment with regard to gross margins, obviously our gross margins were impacted by the increase in memory last quarter. If you look at it very, very simplistically, a $20 million increase in memory business which we had Q2 to Q3, if you had gotten 40% margin on that, that is $8 million. That is a full percentage point in gross margin. Now that is not quite what happened, we do get some margin off of memory. To answer your other portion of the question, no, we don't lose money on memory, but it is just not a high margin business. Tayyib Shah - Longbow Research: Thank you. Jen-Hsun Huang: Yes, Tayyib. Thank you.

Your next question comes from the line of Pranay Laharia with Deutsche Bank. Pranay Laharia - Deutsche Bank: A question on die size. So your G80 die size looks to be a lot larger than your G70 and it appears likely that in this new generation you'll lose the die size advantage that you guys had over your competition last time around. Can you talk about what gross margin impact these two factors will have? Jen-Hsun Huang: First of all, I guess I all answer the second question first. This time around the competition hasn't even shown their products yet. I guess at this point their die size would be infinitely large, and so I would say that we have -- we still have a competitive advantage relative to that. The die size is larger, but the ASP is also higher, and so you have to balance those two things. You know GeForce 7900 is now well into the $299 segment. And I have seen some prices down that are even below that. But that is not where GeForce 8800 is positioned right now. The GeForce 8800 is positioned at the enthusiast segment and the very high-performance segment where either the gamer or the enthusiast demands to have the absolute best, and has a real need to run games at extreme high resolutions and the most modern games. We have repositioned the 7900 starting last quarter into the lower parts of the performance segment, and it is now solidly there, and it is doing fabulously. And so the two products are simply positioned at different price points in different parts of the marketplace. Pranay Laharia - Deutsche Bank: Let me just sort of follow-up on that. Do you think when your G80 line ramps up across the stack on a full stack for full stack comparison, will you be the same die size as you were with G70 or will you be higher? Thinking logically that ought to dictate your gross margins for the next one year. Jen-Hsun Huang: That is a good question. G80 is just the first of the G8X family. And there are many other G8X families, probably nine others. We're going to -- all the numbers in between. So the GPU is designed to be scalable in architecture. And our engineers are very, very rapidly and very hard at work in building all kinds of products derived from the G8X family. Pranay Laharia - Deutsche Bank: Okay. And then just one last question. For the Santa Rosa platform, do you compete with G70 or with G80 derivatives? And where do you think your product -- where do you think your market share goes in notebook discrete graphics with Santa Rosa? Jen-Hsun Huang: Santa Rosa notebooks are DX10 notebooks. They are Vista, DX10, Blu-ray disk, high-definition video notebooks. And we are the only supplier of DX10 GPUs today, and the only one sampling notebook GPUs. And my expectation is that we -- our success on the Santa Rosa transition should be quite a bit higher than our success even with Napa. Pranay Laharia - Deutsche Bank: Thank you. Jen-Hsun Huang: Yup.

Your next question comes from the line of Rick Schafer with CIBC World Markets. Dan Morris - CIBC World Markets: Good afternoon guys. Congratulations. This is actually Dan Morris calling for Rick. Jen-Hsun Huang: Thanks Dan. Dan Morris - CIBC World Markets: The first question. Your guidance for the consumer division sits slightly up. I might have expected that to be a little bit higher. It is something going on with maybe the NREs and the levels that you're getting there, if you could give an update there?

Yes. The NREs are rolling off. And until we have other programs that replace them, we don't anticipate but we're anticipating that they roll off, so you will see a decline in NRE, offset by the increase in royalties. Dan Morris - CIBC World Markets: How is the NRE recognized and about how much was left?

A small amount is left, and it is recognized on a percentage of completion basis. Dan Morris - CIBC World Markets: Good. Jen-Hsun Huang: Or if I can just add to that. They are ongoing projects on a NRE basis. It is just that it is recognized on a completion basis, and some of the projects that we're currently working on right now are further away from completion, but we're working on those projects. Dan Morris - CIBC World Markets: Thank you.

Your next question comes from the line of Glen Yeung with Citigroup. Peter Karzaris - Citigroup: This is [Peter Karzaris] for Glen Yeung. You put up a good quarter. I'm just curious actually for your inventory it looks like it is down a bit quarter on quarter. You have the new product launch and you have been seeing some substantial share gain. What is your ability to I guess service potential upside for next quarter if you had to? And I have something to follow that. Jen-Hsun Huang: All first of all, I think we actually -- we're actually as passionate as you guys are in reducing our inventories, and still be able to run our business. I know what you are saying is true too. Having inventory allows you to address unexpected demand. But what we're trying to do operationally is to put ourselves in a position where we can continue to address unexpected demand but work down our inventory. That is an intense focus in our company, and our expectation and our goal is to reduce our inventory even further, and yet still be able to address unexpected demands. Peter Karzaris - Citigroup: So, let me ask just a little differently. Jen-Hsun Huang: I guess maybe our -- let me just say just one more thing. It is reduced not by accident. And it didn't reduce unexpectedly. And we hope that it in fact goes down even further in the future. That is our hope. That is our goal. Peter Karzaris - Citigroup: I guess -- let me ask a slightly different way. It looks like this quarter one of places you had upside was in mainstream. You had new products out there. Can you give me a sense of the mix of your inventory and how it has changed?

The mix of our inventory it is waited heavily to the new product. And so are we going to be in perfect mix? Probably not, never happen. But we think we are in good shape from an inventory standpoint to support upside. Peter Karzaris - Citigroup: Thank you.

Your next question comes from the line of Michael McConnell with Pacific Crest. Michael McConnell - Pacific Crest: Thank you. Jen-Hsun, if we looked maybe a little bit longer out to next year and looked at the growth drivers kind of from a product segment, what do you -- it sounds like notebooks are only going to be getting better next year with Santa Rosa. Should we be looking at notebook chipsets as being on a year-over-year basis probably the two major product drivers next year, or can we lump wireless in there as well? Jen-Hsun Huang: Let's see, what did should grow next year. I think GPUs will grow next year because Vista, high def, DX10, they are just amazing, amazing things happening in our PC industry. I haven't felt this excited about all the new technologies coming since Windows 95. And Windows 95 was big, big, as you recall. I think that is going to happen next year. Our handheld business should continue to grow substantially. In fact it should accelerate its growth next year because of our entry into 2.5G. I think our chipset business is going to grow. And the reason for that is partly because of the dynamics I have explained already about Vista and DX10. Vista, DX10 and high def have just raised the bar so that second-tier core logic suppliers are going to have a much, much harder time competing in the future. And they either would have had to invest already hundreds of millions of dollars to get here with DX10 or they are just not going to be able to compete next year. I think our core logic business would do very well. I also think that our serviceable market is going to grow dramatically with the branded Intel core logic business. I think that is going to be big for us. I can't help but believe that Sony is going to incredibly well next year. The early reviews are already really very exciting and so --. And then workstations. Frankly, my psychology right now is that we are in a position to grow all of our businesses next year. And we have strategies to grow all of our businesses next year. And we have reason to believe that the market dynamics will allow us to grow every single one of our businesses next year. Michael McConnell - Pacific Crest: If we look at the desktop GPU business, you have obviously got a pretty significant head start here with the G80 architecture relative to the competition. You had stated in your prepared remarks that you have 89% share in performance segment. Your share relatively in the mainstream segment below that level. So with this head start do we have an opportunity to take some share in that segment relative to the competition as well next year, given the head start? Jen-Hsun Huang: That is a good point. We are certainly still focused on increasing share. We are also focused on increasing revenue [TAM]. I want to continue to emphasize that we -- although we enjoyed talking about share and we enjoy gaining share, one of the focus of our company has always been is creating a larger market for all of us to share, and SLI certainly created a larger TAM. The introduction of DX10 will increase the revenue TAM hopefully because DX10 is so exciting and Vista is so exciting and high-definition video is so exciting it might drive the ASP up. People are looking for more GPU experience, more GPU performance to get the best experience. That will increase the TAM. And so we look for ways to increase the unit attached. We look for ways to help consumers experience better content, and those things always increase TAMs. But we're still very hyper focused in increasing share. Michael McConnell - Pacific Crest: Thank you. That was very helpful.

Your next question comes from the line of Devan Moodley with Scotia Capital. Devan Moodley - Scotia Capital: Hi guys, great quarter. Jen-Hsun Huang: Thank you. Devan Moodley - Scotia Capital: And you guys almost delivered a Q3 that is kind of what the Street was expecting for next year. In that context, obviously things are going pretty well ahead of expectations. What have you done to secure the wafer capacity you think you're going to need? Clearly that has changed from even two quarters ago. Jen-Hsun Huang: We are being one of the largest, and I think we probably are at this point from wafer consumption perspective, the largest in the world, and having such close relationships with TSMC, our single largest foundry partner, and others, I think that really plays a role in this. We have a rigorous forward-looking and forward planning process. Internally we have expected to be here for some time to be honest, and so it didn't happen accidentally. We expected to be here, and so we have been planning for that. And we're planning for next quarter. We're planning for next year. And our alignment with TSMC and other foundries is excellent. They have a perfect understanding of exactly what we need. And there's no evidence whatsoever that they're not going to be able to support us in every way. Devan Moodley - Scotia Capital: Just one follow-up. If we look at a year from now, where would you like the percentage of your desktop GPU business to be in terms of the G80 family? Jen-Hsun Huang: Marv, go ahead.

The normal transition would put it above 50%. Devan Moodley - Scotia Capital: Sorry, desktop and mobile?

Yes. I don't know about mobile [heard about live], so I'm talking about desktop, that is what you asked. Devan Moodley - Scotia Capital: Okay. Thanks guys. Jen-Hsun Huang: Thank you.

Your next question comes from the line of Robert Dennison with UBS. Robert Dennison - UBS: Thanks guys. Good quarter. I'm wondering if you can give me just a little bit more color on the patent license fee. I don't need to know what it is about or what it is for, but I'm not understanding how it is an one-time item. It would seem to me that it would be meaningful for gross margin if you guys had to pay patent license fees.

I wish I can give you more information, but it is a confidential arrangement. It includes payments for use of those patents. It is a significant number of patents. Beyond that I really don't think we can comment. Robert Dennison - UBS: So is it something that you have used this technology for in the past, and so it didn't show up in past margins and you're putting it in this margin, or is it for the future or --?

It is primarily for the past. Robert Dennison - UBS: And Jen-Hsun, I heard you say that you were getting into the Intel integrated MCP market. I also heard Marv say that MCP margins should come up. This is a notoriously tough margin business. It is Intel integrated. Can you give me a little color on how you guys expect to bring margins up in that business, particularly given the 44% range you are talking about next quarter? Jen-Hsun Huang: I'm not sure yet. That is kind of the truth. I don't have a product to sell yet, and so I really don't have very much experience there. But my general experience with -- and you know that gross margin improvement has been a passion of mine and our company for quite a few years now. We have been increasing it quarter by quarter by quarter, and we doing all kinds of great stuff. What I had learned about it is there's probably on balance about three major factors. One of them is your architecture. And so that relies on just the really innovative and the talented, the really creative engineers that we have to come up with innovative architecture. The second one is operational excellence. And that one just those from the front of your company all the way to the back of your company. You just have no waste whatsoever. And perfect yields, but no waste, perfect quality, if you just hit everything at 100% and everything at 0%, you're going to be -- everything else at 0%, you will be in good shape. And the last part of it is just building a great product. You need to have a great brand in this marketplace. And the market that we will serve, the market we will continue to serve is where we believe we can capture the value from the products that we sell. You know that we're not fanatical about revenues; we're fanatical about profits. We don't need to go chase profitless prosperity. We're just not going to do it. We are going to target the segments of the marketplace where our work and our brand is valued. And we will leave the other segments to other people. Robert Dennison - UBS: Okay. Great. Finally, I know you guys aren't offering much in the way of color on PortalPlayer, but do you expect this to be helpful or a drag on margins going forward should the deal go through? Jen-Hsun Huang: It should be slightly dilutive in the first year. And in the second year I hope it is wonderfully accretive. Robert Dennison - UBS: Thank you very much.

Ladies and gentlemen, we have reached the end of the allotted time for questions and answers this afternoon. I would now like to turn the call back over to Jen-Hsun Huang for closing remarks. Jen-Hsun Huang: I want to thank all of you guys for joining us today. We look forward to reporting our progress for Q4. Thank you.

This concludes the fiscal year 2007 third quarter financial results conference call. You may now disconnect.