Ladies and gentlemen, thank you for standing by. Welcome toBest Buy's conference call for the third quarter of fiscal 2008. (OperatorInstructions) I would now like to turn the conference over to Jennifer Driscoll,Vice President of Investor Relations. Please go ahead.

Thank you, Eric. Good morning, everyone. Happy holidays.Thank you for participating in our fiscal third quarter conference call. Wehave four speakers for you today. First up is Brian Dunn, our President andCOO; second, Shari Ballard, Executive Vice President of Retail ChannelManagement; third we have Bob Willett, CEO of International and ChiefInformation Officer; and fourth we have Jim Muehlbauer, Senior VP of Financeand Interim CFO. As usual, we have a broad management group here with me toanswer your questions following our formal remarks. We’d like to request that callers limit themselves to asingle one-part question so that we can include more people in our Q&Asession. Consistent with our approach on prior calls, we will move to the endof the queue those who asked a question on last quarter’s call. I’d like to remind you that comments made by me or by othersrepresenting Best Buy may contain forward-looking statements which are subjectto risks and uncertainties. Our SEC filings contain additional informationabout factors that could cause actual results to differ from management’sexpectations. As usual, the media are participating in this call in alisten-only mode. And with that, I’ll turn the call over to Brian Dunn whowill begin our prepared remarks.

Thank you, Jennifer and good morning and happy holidays,everyone, and thank you for joining us today. We are very pleased to deliverthe news we bring you today because we believe it spells growth -- growth thatcomes from our continued progress in building relationships with our customers.In a minute, I’d like to talk a little bit about why we believe that. But first, I’d like to put the third quarter’s results incontext. If you go back to the first quarter, we talked about financial resultsand strategic results and how they don’t always match up in a three-monthwindow of time. The confidence that we expressed then, even in a toughfinancial quarter, was anchored in what we were seeing with our customers andour employees. We delivered very different financial results in Q2 but with nochange in our focus on driving the customer experience because that is how weare transforming this company. Let’s face it -- Best Buy was built as a distributionchannel, a vibrant, independent distribution channel but a distribution channelnonetheless. The business model initially had more to do with supply, what wecan sell, than demand, what customers want to buy. When margins began to drop and it became more aboutefficiency and speed, we knew we had to reinvent ourselves. That’s wherecustomer centricity began. We have to reach people, employees and customers,and win with them. That’s where the profit pools in growth are. Our solidsecond quarter results were possible only because of the investments incultural changes we have been undertaking to move our company in this newdirection. The third quarter was another transformational quarter andone where the strategic results and the financial results were once againaligned. First, the financial results; today we reported EPS of $0.53for the third quarter, an increase of 71%, with revenue growth of 17% and acomparable store sales gain…

Thanks, Brian. Good morning, everyone. I would like to spendmy time with you today discussing the growth premise underlying Brian’scomments and providing examples of the opportunity we have available to us whenwe operationalize that premise to our full capability. Our point of view is this -- there are opportunities forgrowth that can only be seen by employees who talk to the customers directly inthe places where the customer interacts with the brand. For us, that means inour stores, on the phones, online, and in customer homes. By providing theseemployees with the data and tools they need to understand their community, thevarious customer segments in that community, the needs specific to thosesegments, and placing them in an environment where they are invited andexpected to try out their ideas for better serving those customers, we can growBest Buy at exciting rates. Additionally, we believe that running our business with alens focused on who we serve in addition to what we sell them will unlock evenmore opportunities for growth. We are seeing evidence that using thesedifferent lenses to drive the business does work and I’d like to share somespecific examples of that with you today. While I don’t want to overlygeneralize a single day out of the entire quarter, I am going to comment onBlack Friday because it offers some compelling evidence for us. First, Black Friday and the following weekend was a success.From a financial perspective, we had solid revenue growth and our margins wereup on a year-over-year basis. Our dot-com channel significantly exceeded ourrevenue expectations and it was also a success from the customer perspective. Our customer satisfaction scores were up three points yearover year Black Friday and our customer complaints were down 25%. Additionally,the majority of our growth came from our most loyal customers and from ouropportunity customers. Opportunity customers…

Thanks, Shari. I’d like to take you through an overview ofthe results in the international segment, then I’ll comment a wee bit on eachcountry’s performance as we take our domestic growth engine to internationalmarkets and continue to invest in our enterprise infrastructure. Collectively, our international segment produced operatingincome of $22 million, a material increase compared with the $7 million for theprior year’s third quarter. Our earnings gain was supported by revenue growthof 32% to $1.7 billion, or more than a sixth of the total revenue for theenterprise, including comparable store sales gain that clocked in at 9.3%. We were very impressed with the work that the teams did inserving customers. We are benefiting from the opportunity to achieve fastergrowth in markets outside the United States. As you’ve seen in the news release, our internationaloperating income rate improved by approximately 80 basis points. This gain waslargely due to the focused execution in Canada, which drove 130 basis points ofSG&A expense improvement, as well as an operating model shift in China. These improvements offset a modest 40 basis point decline inour international gross profit rate which reflected unfavorable mix changes andpricing pressure in Canada. All together, our operating profit income rate forour international segment was 1.3% of revenue. We delivered these results whilecontinuing our work through the Geek Squad partnership with Carphone Warehouse,as well as preparing to enter Turkey and Mexico. I’ve already begun down the road commenting on theindividual brands so let me complete that thought. First and foremost,congratulations to the Five Star team on its 13% comparable store sales gain, abrilliant debut to the company comp figure. Because of the very different business model typicallyemployed by retailers in China, which focuses on devoting space in stores foreach of the vendors, this metric historically wasn’t a focus area for the teamin…

Thank you, Bob and good morning, everyone. In short, we arepleased with the 71% EPS growth in the quarter. We saw relatively consistentunderlying strength throughout the quarter and enjoyed a very solid November.Consumer electronics appears to be once again the holiday gift of choice and,as Brian said, our employee planning and execution on behalf of our customerswas second to none. Both our strategic results and our financial results aretelling us that we offer the products people want but more importantly, we areoffering the experience that people want. While we love great financialresults, we are most excited about the positive traction we are gaining asevidenced by our latest customer satisfaction and market share data, whichshows us continuing to build share in key categories profitably. Our 17% revenue growth in the quarter was driven by strengthin both our domestic and international segments. We reported a 6.1% comp in thedomestic business, or roughly 3% when adjusted for the calendar shift. That wasdouble the first half run-rate of 1.7%. The acceleration in comp performance from the previousquarter was a function of both better industry growth and share gains inproduct categories such as gaming, notebooks, and GPS. We’re also doing a better job of developing bundled upsolutions that make sense for our customers and that leverage the benefit of aworld-class retail team. Additionally, we saw a greater revenue contributionfrom new stores because we accelerated the timing of new store openings thisyear. We opened up 72% more U.S. Best Buy stores in the first half of this yearversus last year. As expected, U.S. consumer interest for the quarter centeredon gaming, computing, and GPS. As Bob mentioned, our international growth segment postedstrong revenue growth as well, with 32% growth on top of 51% growth last year.Total revenue growth was aided by the impact of positive foreign currencyexchange…

(Operator Instructions) Our first question comes from ColinMcGranahan with Bernstein. Please go ahead.

Good morning. Thank you. I guess my first question is forBob Willett; who needs a 50-foot HDMI cable in Canada?

Name and address to follow.

I do have a serious question. Looking at obviously November,Best Buy I think led the way in a less intense promotional environment, or amore favorable promotional environment. What do you see so far in December inthe context of the overall holiday shopping trend, which looks like it startedwell on Black Friday but has decelerated since? And how are you thinking aboutthe promotional strategy through the fourth quarter, given your currentinventory position?

I’ll try to take that apart a little bit and maybe let someof my colleagues add some color. First off, you are right -- we did execute ourplans in the third quarter on Black Friday consistent with the environment thatwe had actually anticipated through most of the year. Our teams were muchsharper on our promotional offers and the execution of our store teams werephenomenal. We were very, very pleased with our top line results and moreimportantly, our margin results when we compared them to the previous year. As we look at the fourth quarter so far, the promotionalenvironment continued to be about what we thought. From a sales standpoint,early in December -- you know, importantly we’re trending within the range ofour predicted outcomes for the quarter and historically we know that ourcustomers are shopping later and later each year. Accordingly, we are planningand we are prepared for a strong finish for the holiday season, after what issomewhat a slower overall retail environment in early December. As you know, December is our largest earnings month of theyear and we look forward to giving you an earnings update during our Decembersales release.

Thanks, Jim and just to be clear on that, so trending withinyour predicted outcomes, so that would be for the fourth quarter kind of$1.70-ish implied in your full year guidance?

Roughly a -- we don’t give quarterly guidance, as you know,Colin, but I think if you looked at the fourth quarter, it would implysomething like $1.70 to $1.80.

Perfect. Thank you.

Our next question comes from Anthony Chukumba with FTNMidwest Securities. Please go ahead.

Thanks. Congratulations on a great quarter. I just had aquestion in terms of I guess what you are expecting for this upcoming weekend.It looks like the promotional environment, as you said, has been fairlyrational through the first few weeks after Black Friday. What are yourexpectations for this upcoming weekend and then just after Christmas?

As I mentioned earlier, our teams have been preparing forthe rush of the close of the holiday season all year long and this is the timeof the year where our teams certainly have a lot of energy around meetingcustomer needs as they finish their shopping lists. So we don’t commentspecifically on expectations for the last week or so other than the fact thatwe’ve purposefully made investments in inventory to have great in-stockpositions. We’ve got store labor planned to meet the needs that we see of ourcustomers and we believe that we are going to have a strong finish to theholiday season.

I would just add that we are very confident about theposition our employees in the stores are in to not only execute the plan butthis year we really asked them to innovate around the plan and to make good,smart decisions in each of their localities and we are very confident aboutwhat that means.

After watching the holiday seasons for a lot of years, as wesee things compress closer and closer to Christmas, it winds up becoming moreof an operational challenge than it really does becomes a promotionalchallenge, so it’s who’s in stock, who can process the business best thattypically has done better. And then you are really riding on the brand. One of the things we keep talking about, customer loyaltyscores, is the fundamental thing that drives that last minute choice is whereyou selected to buy probably some time ago. I think that’s been kind oflong-term and we feel like we are in a great position on all three of thosefronts.

Just to add on to Brad’s point, I think what you are seeingand what we are seeing as we go around stores at the moment is that theinvestments that we have been making, the work that the field teams have beendoing, the investments we have been making from a technology and supply chainperspective are really starting to pay dividends. The quality of execution inthe stores at the moment is just incredible. Even when you go in looking fortrouble, frankly you can’t find it. You can always find bits of things goingwrong in any business but overall materially, the quality of execution is justphenomenal and it’s getting better each year.

I don’t know, Bob. If you go in looking for trouble, youcan’t find it? [Multiple Speakers]

I’d say one thing, maybe it just underscores what Brad said;I think when we head into this weekend and the upcoming weekends, we still havea lot of traffic coming into the store. I mentioned it in my remarks but wehave a fair number of customers who come into our stores every day, looking todo business with us and leave without being able to do it because they can’tfind what they are looking for. So the store teams in particular the online teams, areworking really hard to get at the large percentage of folks that come inwanting to purchase and are leaving without that purchase. We see that as ahuge opportunity for us with the traffic we have today to close out theholiday.

Thank you. That was Jim, Brian, Brad, Bob, and then Shari.We’ll take our next question.

Your next question comes from Gregory Miller with MorganStanley. Please go ahead.

Thanks, everyone. I just wanted to get a little bit moreinto the pros and cons on gross margin in the quarter. Jim, you talked abouthow the promotional environment faded and then some puts and takes last year.How much of a positive was the lapping of promotional, particularly intelevision if you look versus a year ago? And then a follow-up on some of thenegative or pressures there.

It’s really hard to tell when we pull apart the promotionalenvironment last year versus the change in offers that we made but if you goback to the third quarter of last year, our gross profit was down roughly 85basis points and if I recall, 30 to 40 basis points of that was driven by therates we saw in the marketplace, particularly in home theater and notebooksduring that time. We’ve been very encouraged by the progress that we’ve madeboth last quarter and this quarter in our home theater space and I think itwould be a mistake just to solely -- and I’m not suggesting you are doing thisbut to attribute too much of that improvement to just the promotionalenvironments. Our teams have gotten much, much more insight on the typesof customer offers that drive the most interest in the marketplace and asyou’ve probably seen, we’ve been refining our HDA advantage program over theyear to get sharper on what our customers want and actually improving ourmargin performance in that space. So that was a very important driver that we see assustaining in the business. The promotional lever piece, you know, it may havebeen in the 15 to 20, 25 basis points range but once again, it’s very difficultto pull that apart when you look category by category, offer by offer.

Sure, but it’s fair to say that there was a portion lastyear that was just promotion but then there were other improvements made tostructurally improve gross margin in those categories.

Yeah, that’s correct. I mean, we talked about last year onthe call, we made some very specific investments to respond to the competitiveenvironment to put us in a position to win for both last year and goingforward. And as you’ll recall, our Q4 performance bore that out and certainlythe way we’ve been building share in some of our key categories this year hasbeen a continuing benefit of the statements we made in our choices last Q3.

And on the negative side, was that pressure simply mix orwas rate down within some of those categories?

In Q3 of this year, Greg, it’s primarily mix. Our gamingbusiness is on fire. It is an area of high, high consumer interest and wecontinue to have that business mix greater. We are going to see a -- it’s stillgoing to be dilutive in the next quarter but we’re going to see a little lessof that as we start to lap last year’s strong gaming performance when there wasgreater availability of some of the initial hardware launches.

Great. Thanks.

Thanks, Jim. Our next question, please.

Our next question comes from David Strasser with Banc ofAmerica Securities. Please go ahead.

A quick question to follow up on that, on the comment ongaming -- as we look into next year, how should we think about this shift fromthe hardware to the software and when do you think that becomes more prominent?

Well, we’re looking pretty optimistically as we’ve seen alot of the cycles in the past. You know, you start out with usually a newhardware release and then follow with the software titles. They don’t usuallyhappen at the same time and we’ve had the same situation in this last 12 monthswith the releases. So we’re looking pretty optimistically for next year interms of the software that’s going to continue to come out, especially as weseek a new kind of software in the social and casual gaming areas, so the RockBand, Guitar Hero III, and then the excitement that we see for consumers aroundthe Wii. So we see a lot of enthusiasm from customers wanting to get a lot moreengaged in the gaming experience, not only on the individual level but withtheir families.

So do you think that next year becomes a better grossmargin, maybe less comp?

I think there’s an opportunity next year for us to continueto figure out how is the customer using the solution in their household andthen what are the things that go with that solution? So as people bring in moregaming systems, how does that connect to their home theater system, what otheraccessories and things do they need? So we’re going to be doing a lot of thesame kind of work for the customer that TVs and notebooks has done aroundputting together the best offer that really makes sure the customer is gettingthe full benefit of what they are trying to do.

And just a follow-up; one of the questions I keep getting isbusiness has been strong now, it’s been a consumer electronics holiday, butwhat about ’08? Just from a bigger picture as you’re thinking about your planfor next year, what do you think are the products that continue to gainmomentum versus products that maybe slowed down a little bit across the --

I’ll just make a macro comment that if you look at thebalance of our products, we are very optimistic about ’08, whether it’s in thecomputer field, television field, gaming field, there’s a lot of products thathave very good arcs. Plus combined with something we feel is that we are makingimprovements in our internal operation which allows us to I think actually growbusinesses at a faster rate than they might growth otherwise.

If you the macro out of it, do you think there is a betterproduct cycle next year than there is this year, if you look at it on acombined basis?

I’d like to answer that in this way; what we’ve been workingon the last couple of years is really get an understanding of our customers’needs as they look at their products. We’ve been taking those needs to ourmanufacturers and really developing products that allow us to shift what we’retrying to build and we’re focusing much more on the output of those machinesand how do we create an experience for the customer. And I think as you readthrough our circular, what you are going to see -- what you’ve seen this yearand what you are going to see more of next year is both private label productsthat deliver a different experience but also our branded partners aredeveloping exclusive products for us that really give us an opportunity toaccelerate growth from a experience perspective that also allows us to reallyadd on all of the additional accessories that drive margin and sales opportunityfor us.

Also, in conjunction with what Dave’s just said and Brad’scomments, what we are really enthusiastic about is what I believe is our mostpowerful growth engine and that is the fact that we are becoming more and moreskilled in connecting and hearing what our employees in the field who areconnecting with the customers every day have to say and turning that intoactionable strategies. We’re enormously enthusiastic about what that means fornext year and the 10 years after that.

I just want to add one thing about one thing we’re expectingto hear over the course of the next year -- 14 months from today, thetelevision system in the United States is going to switch from analog todigital on February 18, 2009. That’s going to happen. This next year, thedrumbeat of that change is going to go through the country and we believe ouremployees in our stores are going to be in a great position to help ourcustomers through that transition. It’s going to be one of the biggesttransitions that happened anyplace in the world of changing an entiretelevision system. And it’s complicated on one level and simple on one levelbut there’s going to be -- 300 million people are going to want to know what’sgoing on and we think Best Buy is going to be a great place for them to findthat out.

Thank you very much.

Thank you, David. Next question, please.

Our next question comes from Gerald Feldman with TelseyAdvisory Group. Please go ahead.

Just a quick question about the stores -- you mentioned inthe release that you now are going to open about 150 stores globally. I waswondering two things -- one is where exactly they will be? Are they mostlydomestic or is it more on the international side? And also, what does this meanfor next year? Does this mean you are going to open a little less than expectednext year or it just -- how does that play out?

Thank you for the question. A vast majority of the storeopenings that we are planning for this year are focused on our domesticbusiness. We’ll be opening up roughly 100 stores this year. That’s up from the90 stores that we forecasted at the beginning of the year. We’re very pleased that we can have store growth outside ofthe U.S. of approximately 50 stores, including our Canadian and ourinternational operations. We have not provided comments on what we think ourstore growth plans are going to be for next year. Suffice it to say, with someof the great opportunities our employees our unlocking in serving customers,some of the product cycle changes that Mike Vitelli and others just commentedon, we are very bullish on the store runway we have in front of us yet and thereturns we are seeing from our new stores planned.

Great. Thanks.

Thanks, Joe and thanks, Jim. Next question, please.

Our next question comes from Chris Horvers with BearStearns. Please go ahead.

Thanks and good morning. First, a clarification question; onthe shift in 3Q and 4Q, so are we talking about 300 basis points in domesticcomps -- is that what you would expect to impact, come out of 4Q? And anyestimate on what the EPS benefit was and then what comes out into 4Q? And then, just a follow-on on the spending type question --accelerating the store growth side in 4Q, that creates some SG&A pressure.As we look to ’08, is that an overall harbinger of what’s to come?

On the calendar shift question, not that we look at this atall, but the impact was actually 2.5% in the third quarter. We actually expectthat that will be a little less in the fourth quarter, just because of the sizeof the fourth quarter is so much bigger from a revenue perspective. That willmoderate to something closer to 1% for the total fourth quarter. As we look at the new store growth, we actually haven’taccelerate our openings in Q4. We accelerated our openings earlier in the year.I think I said in my comments that we had 72% more new store openings in thefirst half of the year. We really took it as a purposeful investment this yearto get those stores opened early so that those teams would have more time onthe ground before the holiday season. And we actually saw a benefit to doingthat in our sales in the third and we certainly would expect that to continueto the fourth quarter. So really, no -- if anything, we have fewer new store openingsin Q4 this year than we’ve had in previous years.

Jim, did you want to estimate the Q4 EPS impact of thatcalendar shift?

Thank you, Jennifer. I think the question on the calendarshift, we estimate that it was worth roughly $0.03 to $0.04 on Q3, so from anoperating income growth perspective, our reported operating income growth wasup 79%. I think if we exclude the calendar shift, it merely would have been up60% or so.

So does that mean -- so I guess we might read this as, justto play devil’s advocate, that you are less optimistic about 4Q?

Less optimistic in what sense?

From an EPS growth perspective.

I think given the shift in the calendar, which is going tohave a similar $0.04 impact on the fourth quarter, although we have obviously amuch larger base of EPS, and more importantly the loss of a 53rd week from lastyear, are the reasons we believe that the Q4 operating income and earningsgrowth will be less from a percentage standpoint. We are certainly not bearish on Q4. We’re playing our planout the way we intended all year long.

And just one follow-up; could you remind us what the 53rdweek benefit was last year in 4Q?

The 53rd week was roughly -- I think it was $0.03 to $0.05is what we called out.

Thank you very much.

Next question, please.

Our next question comes from Michael Baker with DeutscheBank. Please go ahead.

Thanks, guys. I just wanted to ask about your Apple producta little bit. You mentioned it’s in 200 or so, 270 stores. How much of animpact is that having to the comps? Is that big enough, just that percentage ofthe stores to actually matter? And then, any insight into how you are going toroll that out? Next year you talked about some exclusive products. I imaginethat that’s one there, how that might roll out and what kind of compcontributor that could be in the future.

First of all, let me talk about the impact. I think there’sa -- I mean, we really don’t discuss balance of sale with regard to any of ourproducts but let’s say that from a standpoint, the Apple share has been growingin our stores as a result of our investment but more importantly, I think theimpact has been solid in terms of the overall performance of our employees inthose stores. They are excited to be able to offer another brand, another setof solutions to our customers and we’ve seen substantial growth not only in theApple component but across the entire PC area of the store as a result of thembeing in the store. As for next year, we have a very, very solid relationshipwith Apple. It continues to grow. They are very delighted with what it is we’vebeen able to accomplish with them and I think you’ll see sustained activity interms of many new stores being added to the stable each quarter as we goforward next year.

Okay, thanks. That helps. And then one follow-up, if Icould; I’m just wondering, what was behind the strategy to now brand the hometheater installation also under the Geek Squad umbrella? Was that somethingthat your customers were telling you or just some color there?

It was just that simple. We asked our consumers what theythought of the Geek Squad brand and they already thought we were doing hometheater install, so the benefit of connecting that and build brand awarenessand take advantage of our service capability was to put that brand holisticallyover our mobile installation, our auto techs, or home theater installation, andour computer agents.

And customers think about it that way so it enables us toput a more singular message into the marketplace and enables us to get moreefficiency and higher awareness out of the Geek Squad brand. And just tying back some of the comments that Shari madeearlier about really building -- and Brian -- building up our loyalty with ourbest customers. Some of the things that we just talked about in terms ofservice and in-home installation and the Apple brand we’re finding are the --our customers want -- our best customers want more. They want the great brands.They want the brands that do more, like Apple, and they want to do more withthat experience, so that’s who we’re finding that is really attracted to ourservice offerings. As we go forward and we try to please our best customers whoare asking for more, you’ll see us pushing the edges of the differentbusinesses that we are in.

Okay, great. Thanks.

Thank you. And those answers were from David [Ashan] andBarry Judge. Next question and last question, please.

Our last question comes from Gary Balter with Credit Suisse.Please go ahead.

There seems to be some confusion on Q4 and I thought itwould be useful on the call to just go over it, because I think -- you tell mewhere I’m missing something but to do it properly, we should be thinking aboutessentially the 155 from last year being almost 145 when we take out the extraweek, we take out the gift card, and we take out the shift in the week afterThanksgiving. So when we compare 175 to 145, that’s 20% up. That seems like apretty nice estimate. Am I missing something there?

Gary, I don’t think you are missing anything. We think ifyou look at the reported numbers and you adjust it for that 53rd week, we thinkwe are going to be in a 20% earnings growth for the fourth quarter, which weare very pleased with.

Okay, yeah, because that’s what we see but it seems likesome people are not appreciating that 20% up in a difficult environment so Iwanted to make sure everybody heard that. Thank you very much.

I appreciate that and we are -- we are not voting forcalendar shifts in the future. Thank you, Gary.

Thank you, Eric and thank you to our audience forparticipating in our third quarter earnings conference call. As a reminder, areplay will be available in the U.S. by dialing 1-800-405-2236, or 303-590-3000internationally. The PIN number is 11103881. The replay will be available inabout an hour and available until December 25th. You can also hear it on ourwebsite under For Our Investors. If you have any additional questions, please call Jenniferat 612-291-6110, or if you can’t get Jennifer, call Carla Haugen at612-291-6146, or me, Charles, at 612-291-6184, and reporters as always, pleasecontact Sue Bush, our Director of Corporate Public Relations, at 612-291-6114.And that concludes our call, so if we can please end the call, Eric.

Thank you, sir. Ladies and gentlemen, this does concludeBest Buy's conference call for the third quarter of fiscal 2008. You may nowdisconnect and we do thank you for using ACT conferencing.