Kevin Sellers - Vice President, Investor Relations Paul S. Otellini - President, Chief Executive Officer, Director Stacy J.

Smith - Chief Financial Officer, Principal Accounting Officer

David Wong - Wachovia John Pitzer - Credit Suisse Uche Orji - UBS Jim Covello - Goldman Sachs Srini Pajjuri - Merrill Lynch Chris Danely - J.P. Morgan Ross Seymore - Deutsche Bank Sumit Dhanda - Banc of America Glen Yeung - Citigroup Tim Luke - Lehman Brothers Hans Mosesmann - Raymond James John Lau - Kessler Mark Lipacis - Prudential Cody Acree - Stifel Nicolaus Douglas Freedman - American Technology Research David Wu - Global Crown Capital

Thank you and welcome, everyone to Intel's Q4 2007 earnings conference call. Joining me on today’s call are Chief Executive Officer Paul Otellini and Chief Financial Officer, Stacy Smith.

As usual, Paul will be discussing the highlights of the quarter and the year and Stacy will then provide more details on our financial performance in Q4, as well as the business outlook for the first quarter and full year 2008. Following Stacy’s comments, we’ll be happy to take questions.

A few important items before I turn it over to Paul -- first, we posted our earnings release and updated financial statements to our investor, intc.com, for anyone who still needs access to that information. Also, if during this call we use any non-GAAP financial measures or references, we will post the appropriate GAAP financial reconciliations to our website as well.

Next, a replay of today’s call will be posted on our website at around five o’clock Pacific Time and will remain there for approximately two months. Lastly, we have scheduled our annual analyst investor day on March 5th and 6th at Intel headquarters in Santa Clara.

We look forward to seeing many of you there. Our quiet period for the first quarter will therefore begin at the end of business Friday, March 7th.

As we begin, let me remind everyone that today’s discussion contains forward-looking statements based on the environment as we currently see it and as such does include risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially.

So with that, let me now hand it over to Paul.

Thanks, Kevin and thank you all for joining us today. The fourth quarter capped a very strong 2007 for Intel.

We returned to annual growth with revenues up over 8% and operating income up over 45% for the year. We achieved our goals of regaining product leadership across our entire product line and of becoming leaner and more efficient overall.

With our tick-tock strategy working superbly, we exit 2007 with the strongest combination of products, manufacturing, and silicon technology leadership in our history. We have reinvented the transistor with our new Hi-K metal gate formula and are pleased to note that the initial ramp of our 45-nanometer process exceeds that of our 65-nanometer process.

We now have over 30 products launched and shipping in high volume based on this new technology. As we look at the fourth quarter results specifically, we continued to benefit from strong demand for our processors and chipsets.

ASPs were firm and costs continued to decline, contributing to an expansion in our gross margins of about seven percentage points from Q3. Now let me touch briefly on each of our major business segments.

Our server business had a great fourth quarter as we shipped a record number of processors. We experienced strong double-digit revenue growth in the fourth quarter, both on a sequential basis as well as year over year reflecting the strength of our quad core Xeon processor family.

Our new core microarchitecture MP platform called Caneland exceeded our ramp and conversion targets for the quarter. Mobile unit growth continues to be very strong and consistent with the shift to mobility we’ve seen over the past couple of years.

Processor and chipset units both set a record in the quarter. As mobile continues to grow as a fraction of the PC market, system price points have expanded to include new lower prices consistent with consumer purchase capabilities.

We are participating in these price points today with a variant of our core microarchitecture and will be adding versions of Silverthorne later this year to address even lower price points with good margins. This is a trend for which we have been planning and believe it’s a net positive for us as the mobile segment continues to grow.

Our recent launch of new 45-nanometer mobile processors begins the transition of our entire mobile lineup to this technology, which will span from the highest performing laptops to the very lowest cost ones, allowing us to extend our lead in performance, power, and cost in this critically important segment. Our desktop business continued to build on the strength we showed last quarter.

Our desktop quad core product shipments grew more than 40% from the third quarter, which helped to fortify ASPs in this competitive segment. Our chipset business continued to see strong growth during the quarter.

Units grew from the third quarter, setting a record and grew sharply from a year ago. Our business continued to be strong and grew from a year ago across all of our major business segments.

Our channel business also saw record shipments for the quarter, with servers and mobile microprocessors showing particular strength. Overall, channel inventories appear healthy and in line with our expectations as we head into Q1.

Our flash businesses had a challenging quarter. NOR units declined sequentially even though ASPs increased.

Our NAND business continues to ramp with revenue higher in the third quarter on sharply higher unit sales. The NAND competitive environment was worse than anticipated, causing ASPs to decline significantly from the third quarter.

We plan to close the Numonyx transaction in the first quarter of 2008, something Stacy will address in his remarks momentarily. In closing, we are very pleased with the significant progress we made on our strategic objectives during 2007.

We enter the new year leaner and stronger. Our tick-tock strategy continues to differentiate our products and technology.

Our business is growing and our financial results are rewarding. We remain optimistic about 2008 and we enter the new year confident and motivated to build on the successes of ’07.

Let me now turn the call over to Stacy for a detailed look at our financial performance as well as our business outlook for Q1 and full 2008. Stacy.

Thanks, Paul. 2007 was not only a year of bringing great products and process technology to the market -- it was also a year in which our commitment to efficiency and spending control enabled the country to grow operating profit significantly faster than revenue.

Compared to 2006, revenue grew 8% and with gross profit up and operating expenses down, operating profit was up 45% year over year. We exited the year with an operating income margin of over 28%.

Revenue for the fourth quarter was a record at $10.7 billion, a 6% increase over the third quarter and below seasonal growth patterns following a strong third quarter. Computing related products and NOR Flash met expectations, while NAND Flash fell short.

The quarterly revenue growth came from nearly all product lines -- microprocessors with a combination of record units, record revenue, and flat average selling prices, were a significant contributor. We saw double-digit unit growth in server and mobile microprocessors.

Flash revenues grew in both NOR and NAND product lines. Fourth quarter revenue was up 10.5% year over year.

Growth was driven by all geographies with particular strength in Europe. We achieved full year revenue and unit records in server and mobile microprocessors, chipsets, and wireless.

Gross margin at 58% was up nearly seven percentage points from the third quarter. Gross profit dollars were $6.2 billion, up 27% from the third quarter and up 29% from the same quarter a year ago.

The increase quarter to quarter was driven by approximately three points from lower unit costs and one point each from higher CPU volume from 45-nanometer product qualifying for sale in the fourth quarter and being classified as inventory, from lower start-up costs and from the Transmeta settlement charge taken in Q3. Gross margin was one point higher than the midpoint of our forecast based on lower-than-expected start-up costs and an overall Intel product mix slightly richer than expected.

In a year-to-year comparison, gross margin percentage is eight-and-a-half points higher than the gross margin in Q4 2006. The vast majority of this increase is due to decreasing cost in our CPU business.

We continued to reduce spending as a percentage of revenue during the quarter. R&D and MG&A were $2.9 billion, a little higher than in the third quarter and within the forecast range that we provided in October.

On an annual basis, spending of $11.2 billion was down $800 million from 2006. In 2007, our structure and efficiency efforts yielded about $2.5 billion of efficiency, exceeding our plan to save $2 billion by the end of 2007.

Our spending as a percent of revenue declined by nearly 500 basis points over the course of the year, from 34% in 2006 to 29% in 2007. We ended the year with approximately 86,000 employees, down 8% from a year ago and down 14% from the end of 2005.

Restructuring costs in the quarter were approximately $230 million, $100 million higher than our expectation, primarily due to an impairment related to assets, which we plan to sell in conjunction with the divestiture of our NOR Flash memory business. The impairment is based on the revised value we expect to receive when the deal closes.

On the balance sheet, inventory declined during the quarter by approximately $170 million to $3.4 billion. The quarterly decline in inventory includes a reduction of NOR inventory of approximately $200 million that has been classified as held for sale and is now presented under other current assets.

Total cash investments, comprised of cash, short-term investments, and fixed income trading assets, ended the quarter at $14.9 billion, an increase of $2.3 billion from the third quarter. Net cash provided by operating activities accounted for the increase.

During the quarter, stock repurchases were $1.5 billion, capital spending was $1.3 billion, and dividend payments were $660 million. As we turn now to the outlook for the first quarter and the full year, please keep in mind that unless specified, the forecasts do not include the effects of any new acquisitions, divestitures, or similar transactions that may be completed after January 14th.

Consistent with our plan to close the Numonyx transaction in the first quarter, we have included NOR Flash in our forecast for consolidated results for Q1. However, our full year forecast does not include a forecast for NOR Flash for the rest of the year since we assume that the transaction will have closed in Q1.

I will use a midpoint of forecast ranges when making comparisons to specific periods. We are planning for revenue in the first quarter to be between $9.4 billion and $10 billion.

The midpoint of this range would be a 10% increase compared to the first quarter of 2007 and a sequential decline of 9%. Although this is well within the wider historical range for the period, the decline is more than the average seasonal decline of 7%.

Our expectation for gross margin percentage in the first quarter is 56% plus or minus a couple of points. This is down two percentage points from the fourth quarter and is driven by new 65-nanometer chipset products that will not have qualified for sale in the first quarter and lower CPU units in the seasonally down first quarter.

Spending on R&D plus MG&A is forecasted to be $2.8 billion to $2.9 billion, 3% lower than the fourth quarter due to a reduction in profit and revenue dependent expenses. In addition, in a separate category for restructuring and asset impairment charges, we expect expense of approximately $100 million.

Depreciation is forecasted to be approximately $1.1 billion. Our estimate for gains and losses from equity investments and interest and other income is a net gain of $175 million.

Looking ahead to the full year, we are planning for gross margin percentage to be 57% plus or minus a few points. The five percentage point increase from 2007 is due to lower unit cost of computing related products and, to a lesser extent, the divestiture of lower margin businesses.

R&D and MG&A is expected to be $11.4 billion, up 2% from 2007 as process development engineers transition from 45-nanometer startup activities to 32-nanometer development, causing a movement of spending from cost of sales to R&D, as we would typically see in the year following a process qualification. We are targeting overcall capital spending at $5.2 billion plus or minus $200 million, up $200 million from 2007.

For research and development in 2008, we plan to spend approximately $5.9 billion, a modest increase from the $5.8 billion we spent in 2007 and inclusive of the approximately $200 million movement from cost of sales to R&D. Depreciation for the year is forecasted to be $4.4 billion plus or minus $100 million, down from $4.5 billion in 2007.

The estimated tax rate for 2008 is 31%. As Paul said, we exit 2007 with the strongest combination of products, silicon technology and manufacturing leadership in our history and the fourth quarter results reflect this leadership, as well as the progress the company has made towards improving cost and efficiency, resulting in an increase in operating profit of 105% from the fourth quarter of 2006.

And although there is uncertainty in the global economy, we are planning for another year of growth where profits grow faster than revenue and where our investments in products, silicon technology, and manufacturing leadership continue to generate competitive advantage. With that, let me turn it over to Kevin for Q&A.

Thanks, Stacy. Akia, we’d now like to open the call for questions and answers.

Thanks.

Thanks very much. Could you help us understand your gross margin full year guidance please?

Because you are saying that for the last three quarters of the year, you are not including Numonyx, so that actually helps increase gross margin somewhat. If you start off at 56%, are you reckoning roughly the same gross margin on microprocessors through the year or does it improve through the year?

Let me help you by doing a year-over-year comparison in gross margins going from 52% -- going from, sorry, 2007 to 2008 where you see a five point increase to the 57%. What you see there is that the unit cost improvements are the majority of the increase year over year.

We do see some impact of the divestitures of the lower margin business but that’s frankly in the realm of a point or a point-and-a-half. So the vast majority of the improvement is the unit cost increase.

We are not giving a quarter-by-quarter forecast but you can kind of do the math and get to the first half, second half, understanding that the Numonyx transaction is expected to close in Q1 and is outside the forecast after that.

Right. One other quick one related to that then -- would you expect the percentage of your four-way server revenues as a portion of total sales revenues will rise through the year, enriching the mix in servers?

I would expect that quad-core will continue to grow as a percent of our Xeon shipments, yes.

But multi-processor versus duo-processor?

Well, we are just starting to ramp the Caneland version of the quad-core platform now, as I said in my comments, and that product is on a fairly steep ramp and we have new products coming in over the course of the year. We began retaking our share in servers, in duo-processors over the course of last year, 2007, and now you are seeing us make some good in-roads back into the MP market.

Great. Thanks very much.

Just kind of curious on the March quarter revenue guidance; the below seasonality after a Q4 that was also below seasonality, and also the prospect of you guys gaining share with some of your new product suites, is this a reflection of you guys being prudent relative to the macro environment? Or are you actually seeing forecasts from your customers that would indicate a below seasonal Q1?

Let me actually start this by stating what happened in Q4 and then I’ll segment into how we see Q1. In Q4, what we saw was that the computing related products actually grew as we expected, roughly seasonally on the back of a very strong third quarter.

So the computing related segment of the business came in as expected. The part that caused us to be a little bit below the midpoint was that the NAND pricing environment was quite a bit worse than we expected when we set the forecast for the quarter.

As we go into Q1, there’s a variety of small factors, no one of which I’d say is significant but the combination of these has us a little bit conservative, a little bit cautious as we look at the first quarter. We see that NAND pricing will probably continue to be weak, so that’s a piece of it.

We had some supply agreements in place to provide supply to Marvell as part of the sale of our business to them. We saw some of that revenue go away in Q4 and more goes away in Q1, so that exacerbates seasonality a little bit.

Based on what we see and economic indicators, we think it’s right to be a little bit cautious as we go into the year. And you’ve got NOR that’s in our results now for the first quarter.

NOR tends to have exacerbated seasonality Q4 to Q1, so that moves our seasonality a little bit from what we thought. So several small things, no one of which is significant but the combination of those has us a little cautious as we start the quarter.

You have to keep in mind it’s 10% year-over-year revenue growth in Q1 on top of 10% revenue growth year over year in Q4, so we think the business continues to grow.

Stacy, one thing you didn’t mention was just the PC revenue stream. Is that coming in about seasonal relative to these other adjustments?

And I guess the other question would be did you see any cancellations at the end of Q4 that would make you more cautious about Q1?

The CPU business is [roughly] seasonal when you look at the unit volume that we expect in the first quarter. We saw demand grow through the fourth quarter.

We didn’t see anything unusual in terms of cancellations and we didn’t see anything unusual in terms of inventory building up. Our inventory is lower than I’d like.

The disti channel inventory that we have visibility into is at the low end, so it all felt pretty healthy through the fourth quarter.

Thanks, guys.

Thank you very much. Let me just start by asking about restructuring.

Are we done with restructuring in 2008? And is there any way of characterizing the operational leverage we can get beyond ’08?

So we’re definitely not done until I close the Numonyx transaction, that’s for sure. When we embarked on the restructuring program, as we’ve discussed, it was envisioned as a two-year program.

We are not providing a full year forecast for restructuring dollars but I think I can give you some directional comments. I do expect that I’ll have some restructuring costs in the second quarter and I think it tails off to be a pretty small amount by the time we get into the second half of the year.

The big action left to happen for us is the closing of the Numonyx transaction. We’ve got a couple of smaller factory things going on but the lion’s share of what is left to do is closing the Numonyx transaction for us.

Just one more question; you mentioned Europe as being strong in the fourth quarter but we have picked up [reports], Dickson’s profit warning and some retail sales numbers in Germany, some slowing in Western Europe. Is there any way for us to characterize the channel inventory and just put it all in context as to what we could expect going forward?

Because I mean, if Europe was strong in Q4, if you think we are seeing some slowing now so it is possible that from here onwards, we -- I know you are cautious in your guidance but can you just tell us what you are seeing with regard to specifically channel inventory in Europe and also in Asia? We’ve also heard comments about channel inventory building in Asia, so if you could just address that, that would be helpful.

Okay, well first of all just on Europe, we had a very strong quarter in Europe. It was up 22% sequentially and our customer reports in terms of sales our there are very strong, and including the stuff we’ve received most recently in the first part of January.

So so far, we’ve not seen any significant signs of slow down in Europe or anywhere else, for that matter. There’s some bits and pieces of information out there, like the Dickson’s commentary that you mentioned, but I think we all haven’t really internalized what that may mean in terms of which vendors and which market share and so forth.

In terms of channel inventory, I can only speak to our inventory, our distributor inventory in the channel. On a worldwide basis, that’s in very good shape.

It’s actually down a little bit from the prior quarter and that’s at a point in time when we are trying to replenish that with 45-nanometer product. So if anything, I’d like to try and get that up a little bit just like I would like to try and get our internal inventories up a little bit.

In terms of our customers and downstream inventories, I haven’t heard any problems. You should really ask them about that though.

Okay. Just one last question, please; does the guidance for gross margins for the full year include an expectation that inventories will go up?

And could you just tell us what level of inventory you are comfortable with?

You know, we get this question periodically, pretty much every quarter. We don’t give a forecast for inventory that goes out past the next quarter.

For Q1, I am hoping to actually get a little bit more of the new products into inventory. We’ve qualified products on 45-nanometer, which is Penryn, so I’d like to have a little more headroom there and get ahead of the demand curve that we are seeing.

If I go out over the course of the rest of the year, it’s going to be dependent on a lot of different factors, so I won’t be able to forecast beyond Q1. But Q1 I would actually like to grow it a little bit.

I do see seasonal patterns in inventory, so you can kind of look at that and get an idea. I’m not seeing anything for 2008 that would lead me to be different than what you’d normally see of build ahead for the big selling seasons, but it’s too early to call.

Great. Thanks.

Good evening. Thanks so much.

I would like to revisit the margin question and just understand relative to sort of the pro forma guidance for the first quarter. If I look like for like over the course of the year, we know there’s some positive impacts to gross margins, including mix shift toward higher end and what should be fully loaded factories relative to the inventory rebuild.

So what are the negative offsets to margins that are keeping the sequential guidance? I understand the year-over-year margin guidance is very -- or the margin improvement is strong but what are the negative offsets that are keeping the sequential margin guidance flattish as we go throughout the year?

So let me answer that. I’ll give you the insight I can into Q1 margin guidance but again, I’m not going to give out quarter-by-quarter margin forecasts.

I’m sorry, just -- I don’t necessarily want a forecast but what are the negative offsets that are keeping the full year guidance from meaningfully higher than the Q1 guidance?

In Q1, what we see is that we have some product that we are building ahead on chipsets that will be pre-qualification. We see CPU unit volume being seasonally down.

I think as I work my way through the course of the year, if I’m 56% in Q1 and I’m 57% for the year and I’ve got some of this that is a divestiture that’s to happen, what you see is actually a pretty flattish gross margin if you just kind of average it across the year at a reasonable rate. So I’m not going to give you a quarter-by-quarter forecast but the improvement that we are seeing right now is based on cost and I think that cost improvement continues over the course of 2008.

And I’m sorry, I’ll just ask one more time -- if the cost improvement continues and there should be positive mix shift, what are the things that are offsetting that for the full year?

As I look at the full year, I see some good news based on cost improvement, I see some good news based on divestitures. I don’t have negatives that are hidden in that margin forecast.

So how come it’s not higher for the full year then?

It is the gross margin forecast that we have for 2008.

Okay. Thank you.

Thank you. Stacy, can you comment on pricing?

I mean, I’m just assuming that, you know, looking at your gross margin forecast, there are obviously some negatives as we move into the next few quarters. Is it all pricing related or is it mix related?

And given that you are so early into the 45-nanometer ramp, I would have expected you to see some more unit cost benefits and it looks like you are not going to see some, so I’m just curious as to what is going on there.

We are not going to give a pricing forecast for the year. Our expectation as we start the year is that it’s kind of similar to what we’ve seen over the last couple of quarters.

We have product leadership that helps inoculate us a bit at the high end and there’s competition that impacts us kind of the mid range of our stack and down. But I’d say it’s pretty similar to what we’ve seen over the last couple of quarters and Paul talked about what we are seeing in the mobile segment as that becomes a bigger percentage of the business.

Okay, and then as we move into Q2, obviously you are assuming that you exit the NOR business and historically, I think you did about flat to down 2% or so, so I’m just -- I don’t have a good idea as to how big your NOR business is and any thoughts on how we should model it for Q2?

In terms of gross margin?

No, just the revenues.

Oh, in terms of revenues? We don’t typically break out NOR from NAND.

We give you a segment for the memory business. We actually took away that segment this quarter in anticipation that the Numonyx deal would have closed and it actually becomes a much less important driver of our business.

If we still had that segment, so consolidated results for NOR and NAND, what you’d see from Q3 to Q4 is that revenue grew a little bit from 553 to 586. Paul gave you the elements of that.

The NOR units are down a bit. ASP is stronger based on increase in density.

We are seeing the NAND business ramping, pricing coming down. But I won’t break out the NOR results specifically there but in terms of the full year gross margin, once we’ve taken the Numonyx transaction and it’s closed, it’s a point to a point-and-a-half of gross margin for the year, for the rest of the year.

Thank you.

Thanks, guys. Stacy, just one last quick question on gross margins -- so if we strip the Flash effects, it looks like your Q4 of ’08 gross margin should be roughly similar to Q4 of ’07.

So should we assume that this is your peak gross margin or could it go higher than that? Can you just comment on that a little bit?

Sure. It could go higher, it could go lower.

I feel really good about the progress we are making on the cost side. I feel good about the progress we are making on divesting some of the lower margin businesses.

The key element that could cause it to be higher and could cause it to be lower is what is the pricing environment and that’s really a function of the strength of our product roadmap relative to competition. I think we are starting the year in a pretty good spot but that’s the thing that could swing it up or swing it down.

Okay, and then as my follow-up, I know it’s pretty far out there but can you just comment on what you expect depreciation and start-up cost trends to do in 2009 versus 2008, either up or down?

No, I wouldn’t hazard a forecast for 2009. At the analyst meeting in March, we’ll give you, as we typically do, some longer term trends in terms of costs and where our capital is going and so you will be able to derive some of that, but I’m not going to do that now.

Okay. Thank you.

Thanks. Looking at the mobility group, it looks like your notebook CPU business slowed a bit in its quarterly growth and year over year, but the operating income actually increased pretty nicely.

Can you just give us a little color behind what’s happening there?

Sure, I’ll give you a little bit. You know, I think Paul gave you a lot of it actually in his speech, so if you look at the mobile processing segment, what you saw was double-digit unit growth.

We continue to see the shifts towards mobility, but as notebook becomes a larger and larger percentage of the TAM and we expect a crossover point some time in 2009 where it’s -- you know, as it grows that you see it moving into emerging markets and more price sensitive segments of the market. And so that’s a little more competitive pricing that leads to unit growth that we think is very beneficial to us.

So that’s specifically on the notebook processor segment. You also see in that segment the impact of what I was talking about with the Marvell supply agreement.

That started to come down a little bit in Q4. It will come down more in Q1 so that’s part of what’s driving our Q4 to Q1 seasonality.

And then on the positive side, you see a variety of things but the biggest single item is just the cost reduction we are achieving quarter on quarter. That drives the operating margin results in that segment.

You had a little bit for some other issues like start-up costs coming down and things like that but the lion’s share of that is just cost improving.

So the ASPs in that segment came down mainly because of the mix? Is it fair to assume then that the ASPs in the server and the desktop side of things must have offset that to the positive to get that slack you talked about?

I did say that ASPs were firm and about flat, so you can do the math from that.

Okay, and then I guess as a follow-up and somewhat unrelated, on the CapEx side of things, that rising year over year, can you just talk a little bit about where that spending is going to take place?

Well, what drives our CapEx spending is going to be the build-out of the 45-nanometer factory network. You’ve got a little bit of 32-nanometer actually in there at the end of the year.

Again, I’ll show you more of that at the Spring analyst meeting. You would expect in the year following a process qualification that you’d have a big year from CapEx spending.

We actually see this number as being a little bit below what you’d normally expect based on the progress we’ve made in improving utilizations and efficiency. I don’t want to steal all the thunder because I’ll go through quite a bit of this at the analyst meeting but kind of hidden under the numbers here, we’ve increased the peak that we are building for in 45-nanometer and we are doing it with less capital than we originally anticipated.

And I’ll show you some of that in a few weeks.

Great. Thanks.

Stacy, I had a question for you on the divestiture of the Flash business. Am I correct in assuming that there’s a benefit to SG&A and R&D which is reflected in your full year forecast, mainly in the last three quarters of the year?

And how should we, if you can give any guidance, think about modeling the [one line] consolidation post the divestiture?

Yes, for all of the annual forecast numbers I gave you, it assumes that the NOR business is part of our consolidated results in the first quarter and then not part of the consolidated results Q2, Q3, Q3. The impact of that is you’ll see the revenue come out, you’ll see gross margin get a little bit better, we’ve talked about that.

You will see a minor impact to SG&A and then we’ll pick up on a one quarter lag the gain or loss from Numonyx, but it’s going to be outside the consolidated operating profit results of the company. So it will be in the EPS but not in the consolidated operating profit results.

Okay, good. And a quick follow-up; the factors you cited for your Q1 guidance being a little below seasonal -- weak pricing in NAND, the Marvell supply agreement, NOR seasonality, and then the economic forecast -- could you sort of break out or rank order the drivers for the impact versus a down 7% seasonally normal quarter?

Given that we are kind of inside a wide range of seasonality, albeit at the low end, you are getting into some pretty some impacts -- again, no one of which is super significant. It’s the combination of those that has me a little cautious as we start that first quarter.

So if you are asking is it concerns about the computing related segment that’s really driving that, it’s not. It’s a variety of factors, with macroeconomics being one of them but other more specific factors being part of it as well.

Okay. Thank you very much.

Thanks. Stacy, you gave us guidance, full year guidance for gross margins -- what’s the underlying assumption about the PC industry that you have to help you to give that guidance?

And within that, do you think Intel is going to be above or below that, or gaining share within that forecast?

I’ll actually kick that one over to Paul.

Let me give Stacy a break here. We’re assuming -- well, let me back up.

Most of the industry analysts have PC unit volume growing in the low double digits in ’08 over ’07. That is an assumption we wouldn’t argue with and that’s one that we are building our capacity plans around.

Okay. All right, low double digits, okay.

And then when you -- actually, let me ask this question and unfortunately, Paul, it’s for Stacy; the tax rate was a little bit higher than we thought. Can you give us the outlook for the tax rate in ’08 and what we should be modeling for that?

I think I gave you the tax rate for ’08 of 31%. What we saw in Q4 was a little bit of a shift, so we were a little higher than our forecast in Q4.

It was a little bit of a shift to taxable income in higher tax jurisdictions. You will see that the ’08 tax rate is quite a bit higher than 2007.

You have to remember we had some one-time tax settlements in the first part of 2007 that has our 2007 rate pretty low.

Paul, I’m sorry, the other part of my first question was whether or not you thought Intel would be gaining share in your ’08 forecast.

I don’t think I want to forecast that right now. We are -- I think our product line is solid and our capacity is, relative to our view of the market, unconstrained.

So we’ll see how it sorts out over the course of the year.

Okay, thanks.

Thanks. Stacy, in discussing the weakness of the NAND business the led you to be slightly below the midpoint of the guide, could you just frame for us what the impact was there and what’s the range of how much that may have been and how we may perceive that to be impacting the first quarter as well?

Well, I think you can do the math. I think I gave you all the pieces.

In Q4, the computing related products and NOR Flash came in roughly in line with my expectations when I set the quarter. The miss was based on NAND and specifically the NAND pricing environment was quite a bit more challenging than we thought.

As we go into Q1, again that’s a variety of factors. NAND pricing is one of them that has us at the lower end of the seasonal range that we’d expect.

With respect to your OpEx guidance, it comes in for R&D and SG&A for the full year of calendar ’08 slightly above some of the street models in a period when you have been very focused on efficiency and cost reduction. Could you outline whether we should view those numbers as somewhat conservative and what the key areas of investment may be in terms of both R&D and SG&A?

I think that’s one I’ll save for the analyst day. We will go through in some detail the investment profile and investment in growth businesses versus core, so I’ll show you that then.

We are up a little bit year-on-year but we also have this reclassification that we tend to see every couple of years of R&D heads that move from getting the process into production, which was 45-nanometer, to now doing pure R&D on 32-nanometer. That really accounts for the increase that we see year over year.

Thank you.

Thanks. I think most of my questions have been answered but just a quick one, just so we put it on the table before it comes up again later on in the week -- is there any double ordering whatsoever in your business that you can tell?

Not that we’ve seen any signs of, Hans.

Thank you.

We try to monitor this pretty closely.

That’s good. Thank you.

Great, thanks. Paul, you’ve given us a lot of the data points and I wanted to recap what you said -- the lower-than-normal seasonality for Q1 is based upon a lot of different factors but you remain unchanged with regard to a double digit consensus thought process for what the PC growth rate would be for 2008, am I correct on that?

Right, and Stacy said I think pretty clearly that our view of Q1 is not being clouded by a pessimistic view of computing.

And in terms of any other changes, I know you may have answered this but nothing has changed in terms of the fundamentals on the emerging markets or the U.S. to change your thought process this early in the year for that double-digit growth, is that correct?

That’s correct and if anything, I think this shift towards mobility continues to be one of the growth drivers of the industry and that is, as price points for notebooks come down, that tends to open up even more markets, on one side. The other side of this thing we didn’t talk much about was so far in the call is servers.

We had an outstanding quarter and an outstanding year for servers and servers and notebooks go hand-in-hand. The servers are building the infrastructure for the Internet and the enterprise and the notebooks are essentially becoming the clients to view those on.

And the combination we think is very powerful and is not showing any signs of diminishing.

And that leads to a final segue to my last question and speaking specifically on servers, your competition had indicated that they were constrained and that may have led to a favorable, more favorable pricing environment. Do you see that continuing in Q1?

Well, I don’t know what their plans are. We’ll hear a little bit more later this week but what we are finding is customers are very satisfied with the products we are shipping, both of MP and DP and our volumes are growing very, very nicely.

And you saw very clearly in the last couple of years that when server momentum changes in one direction, it tends to move in that direction for some time. I think the wind is at our back at this point.

Great. Thank you very much.

Maybe a question for Stacy -- at IDF, you guys showed a chart of forecasted microprocessor manufacturing unit cost by quarter, which I thought was quite helpful. Would you say that that chart is still a fair approximation of how you expect your microprocessor manufacturing costs to track for the year, or have your expectations and outlook for that cost structure changed?

Thank you.

We will update that chart for SAM that you’ll see in a few weeks, so I don’t think I’ll go through the year. If you look at what we are seeing in the first quarter, what you see is a slight increase in CPU cost as we ramp the 45-nanometer process that was exactly as we predicted at the Spring analyst meeting last year.

It’s offset by the fact that our chipset cost is better based on a variety of factors but running full factories is certainly a part of it. So yes, I think that the Q1 cost trend that we are seeing is directionally the same as what we showed you.

We are starting the year with probably a little better cost momentum than I was anticipating and we’ll update that when we get to the spring analyst meeting in a few weeks.

Great, thanks. Very helpful.

Thanks. The part of the mobile ASPs, obviously emerging market growth has been very strong.

To what extent does the rapid growth of these emerging markets has any impact on your overall view in ’08 or maybe even into ’09 for PC revenue growth?

Well, it’s a bit part of it. I think that -- for example, this last quarter in Q4, Asia-Pacific and Japan hit both records.

Now, Japan is not an emerging market but Asia-Pacific is a pretty good surrogate for that and sales in China continue to boom and I think with the Olympics coming on this year, it’s going to be even a better year for electronics in China.

I guess what I was trying to get to is do you get to a point where we are getting some diminishing returns where the mobile prices are falling so rapidly that we are not outrunning that unit growth?

No, I don’t see that happening, number one. Number two, mobile ASPs are still better than desktop ASPs no matter what you do here.

They are always going to be above them. And then I alluded to it in my comments, one of the things we are excited about is embracing this trend with a new product line aimed at this, which is aimed for lower cost notebooks based upon Silverthorne.

And that allows us to take pricing down even farther, to take the bill of materials down for these machines lower and make very good margins because our costs are substantially lower than the existing products that we ship into these things. So having a tailored product for ultra low cost notebooks, if I could invent that phrase, is a first for us and I’m very excited about it.

And then lastly, Paul, you made specific remarks to macroeconomic concerns but it sounds like everything within the PC space is relatively healthy. Is there anything with the general electronics and technology that you can point to that you’ve keyed in on in the last few months that’s giving you specific pause?

Or is it --

Well, actually I don’t think I said I have concerns -- I said I have the same caution that I think that everybody in America who watches CNBC has today. You hear all of the pundits saying that the world is going to go to a trash basket and you worry.

It may be a self-fulfilling prophecy. At this point though, we don’t see anything on the horizon.

Our customers don’t see anything on the horizon. I was at CES last week talking to people from all around the world and we just don’t see it.

You have to remember that 75% of Intel's revenues are not in the United States and that’s where the bulk of the growth has been coming from. So if there’s a near term concern, I think it tends to be focused on the U.S.

market, particularly on the U.S. capital markets, and our customers at least and we don’t see that bleeding over at this point in time.

It would be imprudent not to be cautious about it though.

Perfect. Thanks.

Thanks for taking my question. Paul, just to sort of dig into what you just mentioned a little bit deeper, would your plans change significantly if you did see macro effects start to hit your business, given the fact that it does look like you are spending more money and the R&D and SG&A spending also are calling for increases, when we had been under sort of more of a belt tightening mode?

Well, let me back up -- we’re not really growing our spending. Stacy talked about some structural changes in terms of dollars -- $200 million moving from cost of sales to R&D as we move from the natural part of the cycle of deployment of new silicon technology to R&D and the next generation of it.

So that is the fundamental thing. But with the exception of things like foreign exchange, our spending is fundamentally flat below the line and pretty much across the board in terms of the company.

We are on track to deliver that third billion dollars of overall structural efficiency program spending that we said we would do when we set the program in place a year-and-a-half, two years ago. We got over $2 billion this year and that third billion will come in -- in ’07, the third billion will come in 2008.

So I just don’t see it.

All right, and then could you talk a little bit about, you know, you do have the operating model back with its legs underneath it here, spitting out some pretty nice free cash flow. Can you talk about some of the uses that you see using for that?

Or how should we think about buy-backs versus dividends versus other uses of that cash?

And this is where we never help you as much as you want in terms of specific guidance. In the fourth quarter, I think it’s pretty indicative of our strategy.

We did $1.5 billion worth of buy-back. We raised the dividend.

We paid the dividend, so you are going to continue to see us use both ways to return cash to the shareholders over time. And beyond that, I won’t forecast for you a specific buy-back level for 2008 or for Q1.

And then if I could just focus in quickly on some product ramps that I think are important for the year -- the notebook ramp on Montevina, can you give us an update how that’s going and expectations there? Also, any update you could on your products targeting the graphics market.

Let me back up -- on Montevina, it is not shipping yet. We are on target to ship and launch systems in Q2, mid Q2 timeframe.

That looks very good right now. All the silicon is solid and we are in production on all elements of it.

And I want to reiterate, we are in high volume production across over 30 microprocessors now in 45-nanometers, so that process technology is very strong, including the mobile products. And the question on graphics please again?

If you could update us on product developments there and how that road map is looking, as you’ve mentioned Laramie in the past targeting that market.

There’s two thrusts there. One is to significantly increase the performance of our integrated graphics line, our existing product line and you’ll see a bump in that product line in 2008 that takes the performance up substantially, and then a couple more bumps over the next couple of years.

We are on track to deliver the 10X performance improvement in integrated graphics by 2010 and that’s in a fairly linear fashion from 2006 to 2010. Laramie first silicon should be late this year in terms of samples and we’ll start playing with it and sampling it to developers and I still think we are on track for a product in late ’09, 2010 timeframe.

Great. Thank you for the detail.

Thank you. We’re going to take one more question, if you could.

Thank you.

I just have one question, Stacy; I think last quarter in the conference call, the first quarter assumption on X86 microprocessor was that since those products were produced in Q4 when the factories were full, the gross margin doesn’t take as much as big a dip as you normally would, offset by some additional 45-nanometer start-up expense. But it does look like your guidance is a bit lower than that.

Is that a function of your fear on the NAND pricing situation or have things changed a bit on that theory that when you produce a product and it’s 90 days later, they become revenues.

I don’t think we had forecasted the first quarter gross margin in the last call.

Well, there was talk about the first quarter that you should not equate the unit volume shipments in the quarter with unit costs, because unit cost is determined by the prior quarter production.

So that relationship still holds. That’s part of the good news to costs that we are seeing in Q4.

It was volume that we started to produce in Q3 as the factories ramp towards full. I think we are still -- you will still see the same phenomenon in Q1.

It’s offset a little bit in the CPU space by the fact that we have a higher mix of 45-nanometer wafers coming out at the early end of that process transition. As we typically see, those are a bit more expensive wafers so that causes a slight increase.

That’s pretty much exactly as we had showed you at the spring analyst meeting last year.

How much does the pricing pressure on NAND flash come into your guidance for Q1 gross margin?

It will be a negligible impact on the gross margin in Q1.

Okay. Thank you.

Before we close, what I would like to do, and thanks, David, for the question. I’m going to turn the time over to Paul for just some wrap-up comments and then Akia will close the call.

Thanks.

Thanks, Kevin. As we close out our call today I wanted to look ahead for just a moment.

2008 holds a promise of some significant milestones for Intel. First of all, it marks our 40th anniversary as a company -- 40 years of changing the world.

In 2008, we plan to launch new products such as Canmore, targeted at consumer electronics, and Silverthorne, aimed at low-cost notebooks and mobile Internet devices. These products support our strategy to take Intel architecture and the technical breadth of 45-nanometers into new markets for Intel.

2008 will also see the advent of WiMAX enabled notebooks. Towards the end of ’08, we plan to launch Nehalem, our next generation microarchitecture which brings significant changes and enhancements to our processor product line.

Our results and position exiting ’07, coupled with our plans for 2008, give us optimism for another good year for the company. We look forward to sharing more of our results and plans with you as the year unfolds.

We thank you all for joining our call today and we look forward to seeing many of you at our analyst day on March 5th and 6th here in Santa Clara. Good night.