Howard Kalt - IR, Kalt RosenGroup/Ruder Finn Charles Liang - Chairman and CEO Howard Hideshima - CFO

Glenn Hanus - Needham Jeffery Hekaro - Merrill Lynch Josh Sloan - Glacier BayCapital Kenneth Miller - Bonanza Capital John Ralph - Argon Capital

Welcome to the Super MicroComputer, Incorporated, second quarter fiscal 2008 conference call. (OperatorInstructions). And now, I would like to turn theconference over to Mr. Howard Kalt, of Super Micro Computer, Inc. Mr. Kalt,please go ahead, sir.

Thank you, Ace. Good afternoonand thank you for attending Super Micro Computer's conference call on financialresults for the second quarter of fiscal year 2008, which ended December 31,2007. With us today are Charles Liang,Chairman and Chief Executive Officer; and Howard Hideshima, Chief FinancialOfficer. By now, you should have received a copy of today's news release thatwas distributed at the close of regular trading. A copy of it maybe accessed onthe company's website, www.supermicro.com. Before we begin, please note thatduring the course of this conference call management will be makingforward-looking statements within the meaning of the Securities Act of 1933,and the Securities Exchange Act of 1934. These forward-looking statements mayinvolve judgments based on information that is available now, but is highlylikely to change over time. The company will not necessarilyinform you, if and when, those judgments and the underlying information change.Company policy is to provide material information only in news releases,widely-available conference calls, or filings with the SEC. Additional information concerningfactors that could cause actual result to differ, materially from those intoday's forward-looking statements, are contained in the company's SEC filings,as well as in today's news release. I would add that the companyoperates under the requirements of regulation FD. As a result, Super MicroComputer provided advanced notification of this conference call, by way of anews release issued on January 17, 2007. Like most companies, today we will betaking questions only from securities analysts and institutional portfoliomanagers, but the complete call is open to all interested parties on alisten-only basis. The company will continue to talkwith investors individually and in small groups, but those discussions will notinclude discussion of any material non-public information. If you're interestedin such a meeting, please contact me at 415-692-3059 or via email on thecompany's investor relations website. I'll now turn the call over toCharles Liang, Chairman and Chief Executive Officer. Charles?

Thank you, Howard, and goodafternoon everyone. This was a record high quarter for us in both revenue andprofitability. Our revenue reached a record high of $136.9 million, growing $23million or 21% compared to the same time last year. This quarter net incomereached a record high of $7.7 million, up $2.7 million or 56% compared withlast year. Our leading edge products, likehigh efficiency power supply server UIO and 1U Twin servers were primarycontributors to this increase in revenue and profitability. We consider SuperMicro being the leader in providing energy, retaining twin servers to the industryfor the past two years. A year ago, we had achievedapproximately 85% power-efficiency on some of our servers, while our industryaverage was at above 75% to 80% power-efficiency. We have continued our drive forinnovation and have increased our power efficiency on some of our servers to 93%today, while our industry has moved to 80% to 90% maximum power-efficiency. However, our driver for power-efficiencyservers extended beyond justthe power supply. We also optimize for power-efficiency at the componentslevel, such as motherboard, memory subsystem, and chassis. While it may seemlike relativity is more saving in power, they achieve some significant powersavings on a completed server basis. These savings have been embraced by ourcustomers as indicated by the growth in our business. Most of our UIO and 1U Twinservers have increased significantly in revenue in the last three months.Customers appreciated a better IO bandwidth, flexibility, cost advantage, andinvestment protection, which the UIO provides. Future upgrades can be achievedby replacing the UIO card and/or expansion card instead of replacing the entiresystem. Even without an UIO module or expansion cards, our UIO system functionsas an extremely cost effective server. With UIO feature, a single UIO servercan support many different SAS controllers, 10-gigabit Ethernet controller or InfiniBandcontroller. This versatility also minimizes the number of different servermodels that resellers need to keep in inventory. The 1U Twin servers require halfof many server racks, chassis, power-supplies and power cables, which reducescustomers total cost of ownership to as long as PCU. Additional cost of savingsassociated with best IT space requires us, whereas each year maintenance and management make theseservers a very attractive option for almost any high performance serverapplication. Most of these platforms will continue to be optimized, with ratherthe space technology and design in order to meet the increasing needs of ourcustomers. Delivering innovative applicationoptimizes server solutions and being first to the market has been hallmark ofSuper Micro. Our solutions help the customers grow their business, which inturn helps our growth. As has been proven by our increase in revenue and profitability,we will continue to invest in our infrastructure to support the continuingneeds of our customers, order wise. We have significantly extended ourengineering capability and capacity, both here in San Joseand in Asia. We have also added smallproduction resources to meet the demand of our customers. We are continuing toevaluate a site in Asia to extend ourmanufacturing and warehousing capacity in the near future, in order to reduce postproduction and logistical cost. All of this is within our plan togrow our technical and operational capability and capacity to build a strongerfoundation for our future, while maintaining our financial discipline andgrowing our shareholder value. With that in mind, let me nowturn it over to our CFO Howard Hideshima, who will discuss the financialresults and forecast. Howard?

Thank you Charles, and goodafternoon everyone. First let me point out that our GAAP numbers appear in thenews release while I will discuss earnings, gross margins, operating expenses,and similar items on a non-GAAP basis, which reflects adjustments to excludestock-compensation expenses. Reconciliation of GAAP to non-GAAP is included inthe financial statements of the company in today's earnings release. Let me begin with the review ofthe second quarter income statement. Revenue of $136.9 million for the quarterwas up 20.5% in the same quarter a year ago. The growth was lead by theincrease in our server systems business, which increased 44.4% year-over-year,or $17.8 million to $58 million. Unit volumes on server systemsincreased 29.4% year-over-year from 34,000 units to 44,000 units. ASPs forservers had also increased on a year-to-year basis from approximately $400 perunit to $1,300 per unit. The increase in server revenue was primarily due tohigher sales of our OEMs and end customer solutions, utilizing our high-efficiencypower supply and sales of new products, such as the UIO and 1U Twin. We continue to maintain a diverserevenue base with none of our approximately 400 customers making up more than10% of our net sales in the second quarter. Further more, 62.1% of our revenue camefrom the USand 60.9% coming from our distributors and retailers. Internet data centerrevenue was 12.3% compared to 8.8% in Q2 of fiscal year '07. On a sequential basis, netrevenues were up by $19 million or 16.1% from $117.9 million in Q1. Again, theincrease was primarily due to an increase in the sales of UIO and highefficiency power products. Internet data center revenue was 12.3% compared to 8.6%in Q1 of fiscal year '08. Non-GAAP gross profit was $27.4million for the quarter, up 43.4% from $19.1 million in the same quarter lastyear. Non-GAAP gross margin was 20% of revenue, up from 16.8% a year ago. Thenon-GAAP gross margin increase from a year ago reflects three factors; first,higher revenue mix from computer server solutions; second, improvement in ourcost of standard performance, such as memory, hard disk drive, which we had typicallynot provided a year ago; and third, our higher margins on newer products suchas the UIO and 1U Twin, offset in part by higher inventory reserves in thesecond quarter of fiscal year '08 of approximately 1.8%. On a sequential basis, non-GAAPgross margins increased from 19.6% in Q1 to 20% in Q2, due primarily to higherrevenue of server solutions, which generally carried a higher margin exponent.On a year-over-year basis, non-GAAP operating expenses totaled $14.2 millionfor the second quarter or 10.4% of revenues, up from 9.6% a year ago. The year-over-year absolutedollar increased $3.3 million and was primarily due to additional headcounts orbetween investments in our product lines, and the ramp in our revenues. The company'sheadcount grew by 186 from 548 at Q2 fiscal year '07 to 734 at Q2 fiscal year'08, primarily in the areas of R&D and production. Overseas headcountduring this period expanded from 87 to 131 and is included in the totalheadcount number I just provided. On a sequential basis, non-GAAPoperating expenses were up $1.1 million or 8.4%. The company's headcount grewby 73 from 661 at Q1 fiscal year '07 to 734 at Q2 fiscal year '08, primarily inthe areas of R&D and production. The increase in operating expenses wasprimarily due to the higher salary and payroll expenses associated with thisheadcount increase. Non-GAAP operating profits for thesecond quarter were $13.2 million or 9.6% of revenue, up $5 million or 61.5%from $8.2 million a year ago. The increase was primarily due to our revenue andgrowth margins, offset in part by increase in our operating expense [isperfect] growth of the company and the overhead associated with being a publiccompany. Non-GAAP operating gross profit,on a sequentially basis, was up $3.1 million or 31% from $10.1 million or 8.5% ofrevenue in Q1, primarily related to the higher revenue and growth marginsdiscussed above. On a year-over-year basisnon-GAAP net income for second quarter was $8.6 million or 6.2% of revenue,which is up $3.2 million or 60.5% from $5.3 million or 4.7% of revenue a year ago.On a sequentially basis, non-GAAP net income was up $2 million or 30.5% from$6.6 million in Q1. The tax rate in the second quarter on a non-GAAP basis was36% compared to 32.3% a year ago. The increase in our tax rate thisquarter compared to last year was due to [catch up] in our benefits from R&Dcredits due to the timing of rational reinstatement or the tax credit lastyear. Our non-GAAP fully diluted EPS in the second quarter was 22% per sharecompared to $0.16 per share a year ago. Fully diluted shares used were38.9 million compared to 32.5 million a year ago. Fully-diluted sharesincreased by the 6.4 million shares offered in the company's IPO, which closedon April 2, 2007. On a sequential basis, our non-GAAP fully-diluted EPSincreased by $0.05 per share from $0.17 in the first quarter. Turning to the balance sheet on asequential basis, cash and cash equivalents and short-term investments were$64.7 million, down $4.7 million from $69.4 million in the prior quarter. The decreaseis primarily due to the purchase of a new building, as previously described inour press release on June 28, 2007 for $11.3 million, offset impart by $8.5million positive cash flow from operating activities during the second quarter.Accounts receivable increased by $5.1 million to $45.8 million and DSOs remainedthe same at 29 days from Q1 fiscal year '08. Inventories increased by $19.2million to $92.7 million, with days in inventory decreasing by two days to 70days. The increased two days was due to continuing to ramp our revenue.Inventory reserves were $15.1 million, compared to $10.9 million in Q1. Thepercentage of inventory position was the same between quarters. Accounts payable increased by$24.5 million to $94.6 million, with the days payable outstanding, increasing69 days. The increase in days is primarily due to higher inventory levels as describedabove. Land and building was $38.3 million, representing approximately 352,000square ft. of property in San Jose, California at the end of Q2. As previously indicated in the pressrelease and the 8-K filings, the company closed escrow on a building locatedclose to San Joseon October 16, 2007. The building is approximately 9,000 square feetand costs approximately $11.3 million. Historically, we have allocated 70% ofthe value of the land and 30% to building, which has appreciated over 39 years. Now for a few comments on ouroutlook. The total industry has, historically, a period of seasonal revenue weaknessin quarters ending September 30th and March 31st, our fiscal Q1 andQ3. However, we have also benefited from revenue traction following theintroduction of new products. The company expects the growth trends willcontinue this quarter and that new products introduced during this period’sprior quarters should offset, in part, the impact of seasonal weakness. As aresult, we expect revenue to be in the range of $137 million to $142 millionfor the third quarter of fiscal year 2008 ending March 31, 2008. In addition, the companyreconfirms the guidance provided on November 14, 2007 regarding fiscal year2008 revenues and net income. The company continues to expect that as comparedto fiscal year 2007, to fiscal year 2008, revenues from server side would growby about 50%. Total sales will increase by a minimum of 30% and net income willincrease by a minimum of 35%. It is currently expected that theoutlook will not be updated until the release of the company's next quarterlyearnings announcement. Notwithstanding subsequent development, however, thecompany may update the outlook or any portion thereof at any time. With that, let me turn it back toCharles for some closing remarks.

Thank you Howard. Super Micro hada great quarter, with very high revenue and profitability. The broad base ofleading-edge products, the outflow and the ability to deliver applicationoptimized solutions, in fact, in an efficient and timely manner to ourcustomers around the world to help them succeed drove these outstanding results. We continue to drive our salesquarter wise to further optimize our business through innovation and expansion.This quarter our San Clemente chips set space, Xeon, Quad-Core,DDR2 solutions have gone into high volume production, added this with ourfamily of Whisper-Quite high performance workstations, to our already broad andinnovative product line. I believe we will have another record-high quarter inrevenue. Thank you all for joining us onour Earnings Call. With that, we will open the call to questions. Glenn Hanus - Needham: Good afternoon. Can you hear me?

Yes, Glenn. Glenn Hanus - Needham: Okay. Could you maybe talk alittle bit about the offsetting factors of seasonality and the new products.First talk about seasonality or whether you are seeing if that should be moresevere than normal or about like normal? And then in terms of the new products,any sort of quantification you can help us with -- how much did new productssort of makeup of your revenues this past quarter and how do you expect that torollout?

Okay. Thank you, Charles again. Basically in history, in Marchquarter we have a seasoning added below our quarter. However this yearwe had a very strong product line like we just mentioned, our 1U Twin and ahigh density server have been growing well and we believe this trend willcontinue for the next couple of quarters at least. As well as our UIO Universal I/O,which we introduce last March about nine months ago, this product line alsocontinues growing. And again people like the feature we provide. Also, I mean,I just mentioned Intel's Quad-Core [San Clemente] space, Xeon DDR2 that's all of our lowerpower consumption solution for server and workstation. So we have that productline just in high volume production basically. However with our Whisper-Quiet, Imean, both times we introduced a very quiet workstation solution for the market-- we call it Whisper-Quiet workstation solutions. So with all of thoseexceptional products, I believe in our March quarter we should have a recordhigh in revenue again. Glenn Hanus - Needham: As a follow-up, can you talkabout the -- aside from the new products -- can you talk about the level ofseasonality, and kind of macro factors you are seeing out there? Are you seeingany scaling back in spending or anything on those lines due to the overallmacro environment?

For example last year, three monthsago our March quarter dropped quite a bit from last year, December one yearago. But this year should be different because again our very strong productline, new product line, so I believe like Howard just mentioned, this quarterwe could see a 137 to 142. So we should be able to see some gross althoughmaybe not large, because of the traditional seasonality. So Howard you aregoing to answer.

Glen, like I said to characterize Charles has worked withsome numbers in past, last quarter about a year ago we had about $115million next quarter we had about $105 million. But this quarter we are goingfrom the $137 million we just reported and our range is 137 to 142.

Our next question goes to Jeffery[Hekaro] at Merrill Lynch. Please go ahead. Jeffery Hekaro - Merrill Lynch: Hey, Charles. I was wondering ifyou could talk a little bit more staying on the new products, about the ramp upin the 1U Twin, the UIO, and also, you recently started shipping the SuperBladeproduct. Wondering if you could give us a little bit more color about how thoseproducts are ramping and especially on the 1U Twin, if you talk about any OEMor increased OEM interest?

Yeah, indeed with the IU Twin,the solution we introduced about three months ago. This product has beengrowing very successful and a little bit beyond our expectations, so a verynice product. We have a strong confidence that this product now will continueto grow both with new technology, that's new cheapest and new CPU support andnew system architecture. So we are growing multiple dimensions with the 1U Twinsolution. So in next couple of quarters this product will continue to grow thatwe strongly believe. As to UIO, again, also a brandnew architecture we just introduced nine months ago. So this product follows 1UTwin. We also have very strong confidence they will continue to grow. As toSuperBlade, because we have lot of customers asking for [Odune] kind of 1U Twinand [Odune] kind of UIO, we have allocated more engineering resource in lastsix months in 1U Twin, and UIO. So, SuperBlade continues to growin as most of these, but the volumes schedule added up to the base. So, westarted volume production about four months ago and the quantity is growingmostly not very fast. However we see the booking from customers is gettingstronger and stronger. So for SuperBlade especially optimized, but they have toenter and the one optimized for obviously the environment. I mean [CPDP]right, very quite blade solutions. We have a very strong confidence that thequantity will start to grow quicker, starting from this quarter, maybe aFebruary timeframe, next month. Jeffery Hekaro - Merrill Lynch: Okay. Then could you just touchon the gross margins clearly getting into the 20% this quarter above saw the18% to 19% range? Could you talk a little bit about sort of the componentswithin there; in other words, was pricing components down, a majority of it,was that economic to scale? And how should we think about this going forward asyou saw a bigger percentage of the revenues on the servers?

Yeah, Jeff, this is Howard. Ithink you'll see that most of the gross margin indicates three factors the[phenomena] was built by the shift to our server revenue. You see that going upto about 42% and so that shift, as you know, the components have a lower grossmargins than our complete service solutions in general, so as a shift to morecomplete service solutions we gained higher margins.

Basically, our 1U Twin and UIO as you know is a brand newaspect show so customer we need to pay at even the, they have priced higherpriced product performance in future space. And this trend basically iscontinuing.

And our next question goes toJosh Sloan with Glacier Bay Capital. Please go ahead. Josh Sloan - Glacier Bay Capital: Hey, guys really good quarter, weespecially like to see the margin expansion there so good job. On the bladeproduct, could you go into that a little bit more? I mean, do you have productsnow that address all segments of the market, and is there something competitivethat’s making it a little slower than you thought, or do you just expected toramp up over the next several quarters?

Okay. Yeah, I mean which was shipped aggressively in highvolume and it would be earlier. But again, because of the stronginterest in 1U Twin and UIO we had to allocate more engineering and power tothose products. However, now we’re getting back to the place where we were,again. So enterprise-wise, we had a task sheet about four months ago and officebreak, I mean the break going at 50:50 very low noise they were and 93% highefficiency basically we have been volume production by next month. So with thatproduct we had lots of interest and some POfrom [Cosmo]. Our dada centre optimize [bray] also have been volume productionnext month, so it is growing? Josh Sloan - Glacier Bay Capital: How does the size of the blademarket compare to sort of where you compete right now? Do you expect that to bea major driver over the next several years?

Yes I mean for blade server, nowwhere do our market go, above 55% year-over-year, right. So, compared withdocuments about where do our markets go, only about 5% or 6%. So, pretty much itssales grew much faster the global way. So as chip (inaudible) because theproduct is new to us, we have 0% revenue coming from blade before and nowbecome a big product line to us. Yes we just started shipping four months ago.So the volume space is kind of small but for long term, let's say next 12months, 24 months should be very important product line for us in terms ofrevenue and profitability. Josh Sloan - Glacier Bay Capital: At one point you guys weretalking about building a software server management product, is that still onthe table?

That product line is continuing.So, I believe about this summer or this fall we should have a better sight,better servable customer. So again it's a long-term investment, but we startfrom a hardware business and then gradually we provide some server managementproducts since two years ago and the product line is growing and it's veryimportant product for us especially for long-term success.

(Operator Instructions) We'regoing to go next to Kenneth Miller of Bonanza Capital. Please go ahead. Kenneth Miller - Bonanza Capital: Afternoon, gentlemen.

Afternoon. Kenneth Miller - Bonanza Capital: I wanted to clarify your guidancea little bit. One thing, I don't fully understand, you gave guidance of revenuegrowth in the release 30% and net income growth in the release 35%. It looks tome like your net income is going 60% year-over-year. And so, can you talk aboutwhere you expect operating margins to go directionally, and why thedifferential between your revenue growth and your net income growth doesn'tlook greater than 35%?

Yes, Kenny, this is HowardHideshima. Again, the 35% is on an annual basis. So again, while thequarter-over-quarter is 60%, the annual for what we're giving guidance to isfar from 35% minimum, again I stress minimum growth in net income. Kenneth Miller - Bonanza Capital: But if I'm doing the math quicklyhere, your year-over-year net income growth was actually more like 56%, so reallynot far off.

Yeah. I would rather saybasically, we make a conservative presentation to the market. Kenneth Miller - Bonanza Capital: Well directionally where do youexpect your operating margins to go for the rest of the year? Do you expectthem to maintain at the net, almost 9% level or it will go down in these fourquarters of investments and operating expenses?

I think historically Ken, if youtake a look at our percent of operating expenses compared to what we are, weare running fairly consistent historically. And the company over the lastcouple of years has been very consistent with regards to where its operatingexpenses have been on a percentage basis of revenue. Kenneth Miller - Bonanza Capital: So could you comment on what youthink operating margins will go in the next couple of quarters or not?

We haven't given guidance withinthe (inaudible0 segment.

And we'll go next to [John Ralph.I believe it’s Argon Capital] Please go ahead. John Ralph - Argon Capital: Hi, guys just a couple of quickquestions. One, could you give me again what the CapEx numbers associated withthe building purchase are?

Yeah, $11.3 million. John Ralph - Argon Capital: Okay. That was 11.3. And Inoticed as well there is a new long-term liability on balance sheet, what isthat?

We had a new accounting probableannounced to come out from FIN 48. John Ralph - Argon Capital: Okay.

It's basically the, that was theshift of the tax payable from payable, down below to accrued liability. John Ralph - Argon Capital: Okay, I see. And now the lastthing, can you tell me what the charge was in this quarter for adjustment ofinventory?

1.8%. John Ralph - Argon Capital: 1.8% of revenues.

Right. John Ralph - Argon Capital: Okay great. Okay thanks verymuch.

(Operator Instructions) And itappears at this time that we have no further questions. I would like to turnthe call back over to Mr. Liang for any additional or closing comments. Sir.

Thank you for joining us todayand we look forward to talking to you again at the end of this quarter. Thankyou everyone. Have a great day.

Thank you, ladies and gentlemen,that does conclude the Super Micro Computer, Incorporated second quarter 2008conference call. We do appreciate your participation. You may disconnect atthis time. Thank you.