Goodmorning. Joining me today is Bill Sheridan as is our practice.

Today weannounced our best nine month results in the company’s history. We arereporting first nine month total revenues of $572 million, which is a 42%increase from the prior period figure, and income from continuing operations of$110.7 million, which is 191% increase from the prior period.

Diluted EPS forthe first nine months of 2007 was $1.69, more than double the prior periodfigure of $0.62. Includedin these numbers is the loss from our guarantee book from the Impressionistsales which took place earlier this week.

More recently auction sales inSeptember and October combined were $673 million, which is a 40% increase onthose same two-month sales in 2006. Resultsof our Impressionist and Modern auctions this week fell below our presaleexpectations.

They were profitable, however, and achieved our third-highesttotal ever for the category, totaling $331.5 million and a double-digitincrease on last year's total. We had strong London contemporary sales and record-breaking Hong Kong sales last month as well.

Itis important to note that because of the seasonal nature of the art market thethird quarter has been historically a lost period for Sotheby's, and istypically not indicative of full-year results. We recommend investors focus onresults for six-month periods which reflect the auction market business cycle.

Iwould also add that looking at the results of Wednesday's Impressionist eveningsale as a barometer of our business provides a pretty incomplete picture of theoverall art markets in which we operate, particularly in China, in Europe and in Russia. Yesterday,for instance, we had a Chinese works of art sale in London, which more than doubled its presale estimate.Bill Sheridan, take over and take them through the P&L and balance sheetissues.

Thankyou, Bill, and good morning to everyone. I would like to walk through ourP&L, which is page eight of the press release, as well as remind peoplethat on page nine of the earnings release we have a GAAP to non-GAAPreconciliation.

Ouroverall results, we had a loss from continuing operations for the third quarterof 2007 of $20.9 million or $0.33 per diluted share. This compared to $30.4million or $0.49 per diluted share in the prior year.

The $9.5 million or 31%improvement is largely due to a 48% increase in total revenues during theperiod. Despitethe favorable results for the quarter when compared to the prior year, theCompany did incur losses on certain auction guarantees in this week'sImpressionist and Modern Art sale.

The pretax $14.6 million in losses wasreflected in the Company's third quarter financial results because theseguarantees were outstanding as of September 30. Incomefrom continuing operations for the first nine months of 2007 was $110.7 millionor $1.69 per diluted share, compared to $38 million or $0.62 per diluted sharefor the prior year Excluding the impairment charge relating to the NoortmanMaster Paintings, the insurance recovery from the policy covering RobertNoortman, and the gain from the sale of our Sussex property in the UnitedKingdom in the first quarter of 2000, income from continuing operations for thefirst nine months of 2007 would have been $102.4 million or $1.56 per dilutedshare, a $64 million or 169% improvement for the first nine months compared to2006.

Lookingat total revenues, for the third quarter, total revenues increased $27.7million or 48% to $85.1 million when compared to the same period in prior year.This improvement is primarily due to a $15.8 million or 38% increase in auctioncommission revenues due to a 41% increase in net auction shares during theperiod. Inaddition, of $14.9 million increase in private commission sales were recordeddue to a 485% increase in private sales to $200 million in the quarter.

Verystrong results in the private sales line so far year-to-date. Thisoverall improvement in the third quarter revenue was offset by the pretax lossof $14.6 million in auction guarantees losses.

These were recorded as contra torevenues. Forthe first nine months of 2007, operating revenues were $572 million, a $170million or 42% improvement from the prior nine month period, primarily due to a40% increase in auction commission revenues.

Inthe first nine months of 2007, our auction guarantee position provided asignificant increase in auction commission revenues. These improvements wereoffset by a $24.4 million decline in principal activity revenues related toguarantees, which included losses incurred this week in the Impressionist sale.In addition, in the first nine months of 2007, we had significant upsidebenefit related to guarantees.

Movingto the direct cost of services line in the income statement, for the quarterand first nine months ended September 30, direct cost of services increased$1.5 million or 15% and $12.8 million or 28% respectively. This is consistentwith a significant increase in the volume of business.

Turningto sellers and related costs, salaries increased $9.5 million or 21% to $55million in the third quarter of 2007 and $35 million or 22% to $195 million forthe first nine months. The foreign exchange impact on the salary line wasapproximately 4% of the total increase.

Full-timesalaries increased $3.2 million or 12% in the third quarter and 14% to $93million in the first nine months, principally due to strategic headcountadditions, as well as the new packet of limited salary increases. Stockcompensation expense also rose $2.3 million in the third quarter and $10.1million in the first nine months due to restricted stocks awarded lastFebruary.

Turningto G&A, general and administrative costs, for the three and nine monthsended September 30, G&A expenses increased $6.3 million or 19% and $25.9million or 27% when compared to the prior year. The FX expense was 3% for thequarter and 4% for the first nine months.

These increases were comprised of 22%and $11.3 million in professional fees, largely due to increased legal feesrelated to the legal matters surrounding our York Avenue premises, as well as higher tax fees foroutsourcing costs. We had $1 million for the quarter and $3.5 million for ninemonths for client goodwill gestures, authenticity claims and other litigationmatters.

Travel and entertainment costs were up 23% for the nine months or $3.7million. Lookingat net interest expense, we had substantial improvement in this area as itdeclined $3.7 million or 53% for the third quarter and $11 million or 50% forthe nine months due to the significant liquidity in the business from thestrong operating results.

Turningto earnings per share, overall third quarter 2007 diluted loss per share fromcontinuing operations was $0.33 a share, an improvement of $0.16 from $0.49 inthe third quarter of 2006. For the nine months, diluted earnings per share was$1.69, a $1.07 or 173% increase from the prior year.

Again,the third quarter results were negatively impacted by the pretax loss of $14.6million related to auction guarantees for the New York Impressionist sales thisweek. Bill,I will turn things back over to you at this point.

Sincewe last spoke to you in August, we have continued to experience generallystrong sales around the world. Again, just so that we make sure we are givingyou clarity on this, we held our Impressionist and Modern sales this week,which did not meet our expectations.

Sales were profitable and brought thethird-highest totals in the Company's history. And again, our third quarterresults included a net after-tax loss of about $10 million related to theguaranteed property in those sales, which again took place this week.

Sotheby'sachieved the highest price of the week with Gauguin's Tahitian picture, Te Poipoi, which sold for $39.2 million,just about at the low estimate of $40 million. We sold 10 lots for more than$10 million, interestingly versus seven lots in the spring season at Sotheby'sin New York.

We sold 49 lots for over $1 million. We took onminimal inventory in this sale, save the Van Gogh from Wednesday night, whichis a wonderful painting and something on which we have both received a numberof offers and are pleased to invest in.

Lastmonth Asia Week in Hong Kong achieved itshighest total ever in a series of sales. The nine sales brought just over $200million, which is a 46% higher total than last year and well above our highestpresale estimate of $173 million.

Our Asian contemporary art sale there brought$42.5 million and well above its highest presale estimate of $28 million. Also,last month Sotheby's London held a very successful series of contemporary artauctions in conjunction with the increasingly popular Frieze Art Fair.

Thosesales brought about $135 million, near the high-end of our presale estimate and111% above the prior year series. AsBill flagged, our private sales have been really quite successful, particularlyin the quarter when we sold the Rostropovich collection privately to a Russianindustrialist for an undisclosed sum, and that property was repatriated to Russia.

Asyou look forward, for the remainder of the quarter, next week we're holding ourcontemporary sales here in New York, which have presale estimates of just under $300 million. Threehighlights include two remarkable Francis Bacon pictures, Bullfight and Self-Portrait.And Jeff Koons’ Hanging Heartillustrated today in the New York Times.

On each of those we have had quitesignificant presale interest at this point. InLondon, on November 26 to 27, our Russian art sales areestimated to bring $50 to $75 million.

Highlights of the evening areGoncharova's Bluebells estimated at $6to $10 million, and Popova's Still lifewith Tray, which is expected to bring between $3 and $5 million. Wehave got a superb American painting sale in New York coming up at the end of November where WinslowHomer's watercolor Fishergirls isestimated to bring between $4 and $6 million.

We have got Wyeth, Rockwell,Potthast and Prendergast - pictures of very strong quality in that sale, whichis got a presale estimate of just over $45 million. We'reselling the Magna Carta here in New York in December.

This manuscript from 1297, theoriginal charter that enshrined the rights of man into English law, and is oneof fewer than 20 examples in existence. Its presale estimate is $20 to $30million.

OnDecember 5, inour New York Antiquities Sale, we will be selling one of the most extraordinarymasterworks from the dawn of civilization, the Guennol Lioness. This figure of a carved lioness was madeapproximately 5000 years ago in Mesopotamiaand has a presale estimate of $14 to $18 million.

Bynext week we will have largely cleared our guarantee portfolio, and wecurrently expect those activities will generate a profit in 2007 as they havein each of the past 17 years. As always, we continue to assess our guaranteeapproach and strategy on a regular basis.

These first nine months results wereextraordinary and the best in our company's history. We remain encouraged by2007 auction sales results to-date, which are up about 40%, as well as by thelevel of consignments for the remainder of the year.

And we are hopeful thatthe market will continue to be fruitful and profitable through the remainder ofthe fall season and beyond. Thoseconclude our remarks, and I anticipate you will have a few questions.

So wewill turn it over to our moderator, Michael.

Thefirst question I had was a simple accounting question with respect to the $14.6million. Bill, you had mentioned that was a contra revenue treatment in thequarter?

Yes,within our breakout in MD&A and our 10-Q will be filed early thisafternoon, we break out the various components of revenues, and typically werecord a revenue for principal gain. This quarter, with the loss on theseImpressionist guarantees, that will be negative.

AndI don't believe in the past you have ever called out any changes like this in asale that occurred after the quarter. Has there been history of doing this?

No,and the accounting rules, FASB 5, dictated the guaranteed contracts wereoutstanding at September 30, and prior to issuing the financial statementstoday, the event occurred on Wednesday night where the guarantees did incurlosses. So it is a type one subsequent event for your accounting geeks like me.So it was recorded as of September 30.

Okay.Bill Ruprecht, I appreciate your thoughts on your views. You said the sale theother night was an incomplete view of the auction market.

How much of a factordo you think it was that it was a US location? It occurred the day of a very weakstock market.

Obviously estimates were important as David Norman had said,versus just a change in the cycle or demand. I'm just curious if you couldbreak it down for us like that.

Iwill do my best. Auctions by their very nature are unpredictable.

And they areunpredictable with upside and downside, and that's why people put things inauction to realize what is not entirely certain in these events. Idon't think that the financial markets that day helped us one little bit.

I donot think we can attribute it entirely to the economic environment of that day.I think that some of our estimates were ambitious and informed by the greatsuccesses we have had in the Impressionist and Modern sales earlier in theyear. Ithink during that sale event, which opened on some very, very strong prices andworld records in fact, we then came to a Vincent Van Gogh picture, which muchto our surprise did not sell.

Three people had traveled to New York to buy that picture, and we expected it to sell,and I think that colored the mood of that evening and rattled any number ofparticipants on that night as to what the market was like or felt like. Icannot attribute a lot more certainty to why individuals behaved the way theydid on that night other than that.

These are assets which, as I indicated,George, with the Van Gogh, it is a terrific picture and one which we've got agreat deal of confidence in, which is why we did not sell it that night for alevel below what we thought its value was. Wetook a different approach on other pictures very purposely because in ourassessment of the night and of that market at that time, we felt we were doingthe right thing and have recognized and put behind us in the third quarter somesignificant net losses which totaled about $10 million on an after-tax basis.

Nevertheless,every day is different. I feel pretty good about overall where we are.

I sayagain that our guaranteed book we currently expect to continue to be profitablethis year. Those sales were profitable in the Impressionist marketplace, and mycrystal ball is imperfect, George, and I am professionally pretty cautious.

Ican only tell you that, as I said and referenced earlier, we had a remarkablesale yesterday in the Chinese Works of Art sale in London. We have had a very significant level of interestin the stars of our upcoming contemporary sale, and we will all be a lotsmarter when those sales are over.

Bill,that was the best color you have ever provided on a call, so I appreciate it.

Firstof all, just try to provide us with a little more color on the buyers the othernight at the Impressionist auction. I know your competitors saw a largemajority of Americans buying.

Is that what you saw the other night?

No.I don't do an awful lot of geographic distribution of buyers; an awful lot ofsignificant bidders get very nervous when you reveal their geography becausethey feel as if it is prejudicial to their anonymity. So while I want to beresponsive, I think it is fair to say that the patterns of buyers were notsignificantly different from what we have experienced in the past.

I did notsee a meaningful new trend there.

Fairenough. Looking at the guarantees, can you just walk us through how youguarantee, in looking at the guarantees relative to ranges?

Because I know anumber of the lots sold below the estimated range. Do you guarantee below therange?

I mean how that works. Also,looking at next week's auction, hopefully you will do well with the guaranteedlots.

But if you don't, how would those lots be booked? Would they be booked inthe fourth quarter or what happens?

Ithink in the first instance you said, what did you do in terms of guaranteesthis week, and do you have individual guarantees below ranges, at ranges orabove ranges? Wenever have and never will on a lot-by-lot basis make disclosures about what theindividual transactional specifics are in spite of this suggestion today by theWall Street Journal that that is appropriate.

That is prejudicial to sellers'interests and not something that we anticipate. Overallwe disclose on a quarterly basis what the presale estimates are, what thepresale guarantee totals are, and we create an accounting which reflects thatat the end of every quarter.

As Bill shared and indicated, because theguarantees were outstanding at the end of the quarter, we booked the losses tothe quarter in spite of those being events which took place in November. Nowfor the fourth quarter subsequent events, subsequent to the filing of our thirdquarter, in the fourth quarter any further activity in terms of profit and/orloss in principle positions, as well as the rest of the activity in thequarter, will be booked to the fourth quarter, which will be released in thefirst quarter of '08.

Couldyou just walk us through in a little bit more detail the process by whichpresale estimates are made by department? Is there some sort of pervasivemanagement committee internally that makes some assumptions about the overallstate of the art market, or are they done independently department bydepartment?

Inother words, if one department is somewhat overzealous, I don't know that theymake a habit of it, but just for once they are somewhat overzealous in theirestimates, are they completely independent of others so that the others justdon't make the same assumptions about the overall market but rather just lookat their own department? Could you just walk us through how that works?

Ithink it is fair to say that the 17-year history we have of generating profitsin managing a guarantee portfolio would suggest that we are not a bunch ofindividual systems, but just the opposite in fact. And that overall, decisionsand recommendations--given the volume of money involved--are scrutinized by anincreasingly broad committee of senior staff, which includes myself, BillSheridan, the head of our Finance business, and above certain levels, theexecutive committee of the Board of Directors of this Company.

Soit is our job to try to understand the exuberance or the conservatism ofdifferent members of staff and appreciate their appetite to do business, all ofwhich are measured at the end of the day on a profit basis rather than on asales basis. SoI understand your question.

Do you have somebody or other in-house who isinappropriately zealous? I think the short answer is no.

Anytime you takeprinciple risks, anytime you invest, you have to be prepared to take losses. Ifyou're not prepared to take losses in these kinds of businesses, you're notgoing to be prepared to make a profit.

Soover periods of time that we continue to look at this, we have demonstrated andwe continue to feel confident about our ability to generate profits through aguarantee portfolio. And, as I said, we continue currently to make a profit in2007, and it is our expectation that that will be the case going forward.

Justone quick follow-up if I may. In the last 72 hours, you and Christie's broughtsomething in the neighborhood of $1 billion worth of art in one category tomarket, and that is unprecedented.

Do you think that that was at all a factor,just too much supply at one point in time? I mean there is only so manybillionaires in the world collecting Impressionist art.

Youknow, high tech is a wonderful thing, and I don't think that it is everentirely certain as to what all the elements were that combined in thisparticular circumstance to stress the marketplace. And I don't think that it isan irrelevant statement.

But I think the fact that we sold ten pieces for morethan $10 million this fall rather than seven in the spring suggests thatthere's plenty of demand for really high quality works of art in themarketplace properly estimated. That is a formula that I continue to believe inand continue to believe in the demand side of the business and that people willcontinue to receive those kinds of objects properly presented well and withvigorous appetite to own them.

Canyou tell us what you expect the shares outstanding to be for the fourth quarterand the full year?

Howabout the tax rate?

Itdepends on what country we make the earnings in. It has hovered between 31% to34%.

I don't expect any dramatic changes from that.

Thedealer revenue seems to be higher for three-quarters in a row now - even fourquarters. Is that something we should be looking at staying consistent, and hasthat changed, or should it be coming down?

Thedealer revenue, it is what sales close in a period. And last year we did nothave Noortman Master Painting until June, so the first half of the year did notinclude revenues from the Noortman's operations.

Wasthe majority of that selling Noortman's inventory?

Itis Noortman inventory sales. It is Sotheby's Ventures where Sotheby's directlybuys art assets and sells them.

SoI take it going forward it is probably going to stay in that range as opposedto the sort of $1 million range that it was before; or the $15 million --

Itshould be in higher levels than it was in '06.

Doyou think the same people that are buying the Impressionist art, are the sameones going to be looking at the Contemporary art in the next week, or is it adifferent kind of buyer?

Thereis some crossover in almost all of our markets. I think the reality in this asa business is that there are a relatively small number of people on any givenevening who are particularly influential in the outcome of a sale result.

And Ihave said it before, auctions and markets by their very nature areunpredictable, and if Mr. Jones has had a great week in the financial marketsby shorting or hedging a position; or a Mr.

Smith has had a great week throughthe sale of his company, I simply cannot anticipate their impact on what takesplace next Tuesday or Wednesday night at Sotheby's or Christie's. Butwhen you have a couple of people in any one of these markets that at any giventime may be very significant players and outcomes, all I can do is highlightfor you.

I cannot give you better color or direction on that.

Reading a couple of articles from collectors who havesaid that prices have gotten high: is that just a handful of people sayingthat, or would you say more people are saying that the prices are stillfeasible? Or, is there a general consensus that prices are climbing up?

Ineed you to ask that question in one sentence. I'm not sure I understand it.

Wouldyou say that the majority of collectors are starting to think that prices aregetting too high?

Well,as I said yesterday, we had a presale auction estimate in a Chinese Works ofArt sale that was more than doubled. In September and October through yesterdayour sales were up 32% from prior period.

I don't think that is a statement or aseries of facts which are very well aligned with the statement that people arereluctant to buy works of art or think that they have become overvalued. Ithink in periods of potential inflation and volatility with lots of differentkinds of assets, hard assets are actually something or other that an awful lotof people gravitate towards.

So,we will see. I think that when you operate in markets as ours--which in manycases individual collecting areas only trade 5 to 10 days a year--it is very,very difficult to be very knowing and definitive about what collectorpsychology is, except over long periods of time.

Whatwe can say at this point is that over quite a number of years the demand forsignificant works of art has been growing. The buyer base has been growing, andthe number of people on a global basis who have a very strong appetite to owngreat works of art has been appreciating.

The wealth centers and the qualityand concentration of wealth at the top end of the economic pyramid is notsomething or other that we see abating anytime soon. In fact, works of artremain very relevant and important to a large percentage of the people at thevery top of the economic pyramid.

Myfirst question is with regards to finance. I'm sure you have got details ofyour own financial services.

But over the last couple of years, do you believethat finance has become a significant part of how your buyers are paying forthis art? Do you have any details or light you can shed, be they individuals ordealers just how much maybe credit might be an issue at the moment?

Tobe clear, we do not lend to buyers.

I'mnot talking about your financial services. I'm talking about them borrowing offsomebody else potentially.

Wewould not know that information. We do the appropriate anti-money launderingchecks to make sure we know who the buyer is and what type of business.

We dowhen someone wants to buy we pre-clear them from a credit standpoint, talk totheir bankers, make sure they have sufficient liquid assets to purchase it. Wedo not get into their personal loan borrowing position.

Soyou have no anecdotal information to just tell us whether in actual fact theywere borrowing that money off the bank in other words? You do not know.

Wedo not deal in anecdotal --

Idon't think there is any anecdotal information which I'm aware of whichsupports a broad pattern that you're suggesting.

Canyou give us any likely timing on the outcome of your property litigation orwhen those negotiations might be brought to a conclusion? Andmy final question is on activities as principal.

I think you broke even onactivities as principal in the first half. But am I right in thinking you saidthat you still, despite the recent losses, expect that segment to be profitablefor the full year.

First,on the building, it is a legal matter currently in remediation process, and allwe can say will be in our Form 10-Q that we file this afternoon, and we hope toget it resolved as quickly as possible.

Butit is in arbitration? There is no date given for a conclusion of arbitration?

Ithas not quite proceeded to arbitration yet, but we clearly want to get thismoved forward and get this behind us. Asfar as principal activities, I don't know where you viewed this as a breakevenproposition in the first half.

As we said in our six-month 10-Q, we hadsignificant revenues associated with our principal or guaranteed position. Soit was extremely helpful to our first half revenues and earnings.

Yes,I had a follow-up question on the guarantees. Regarding the pre-tax loss of$14.6 million related to guarantees, was that loss incurred on paintings soldbelow the guaranteed amounts Wednesday night, or does it also includewrite-downs on paintings guaranteed but not yet sold, such as the Van Gogh?

Itis principally paintings that we sold below the guarantee that werecrystallized the night of the sale.

Okay.Any color on post-sale activity? I think you made a comment at a pressconference following the evening that you were sort of besieged by interestedbuyers in some of the paintings that did not sell.

Ithink we have had a significant number of inquiries and events. I cannot detailfor you transactions that are post-sale at this point.

I think it is fair tosay that what I articulated before about the offering of that Van Gogh didrattle some people that were in that room, and after that people took a deepbreath and I think were prepared to look pretty soberly at any number ofpictures and express interest in owning those things. So I don't think thatthere has been a transforming shift in that or overall the markets in which weoperate in.

Ijust wanted to ask about the presale estimate for next week's contemporaryevent. Has the estimate range on that changed at all from your priorexpectation?

No,those are numbers which are in almost every case printed in catalogs which werepublished about a month ago.

Amonth ago you said?

Yes,about a month ago. And so those are just short of $300 million in terms ofpresale estimate.

Thedetails are on our investor relations website.

Theday sale that occurred yesterday did come in a little bit below the range. Canyou just discuss any surprise you might have seen there given the fact those arelower-priced items?

You'retalking about the Part 2 Impressionist sale, George?

Yes.

Thatwas the largest Impressionist Part 2 sale in our company's history. It didabout $63 million in net sales.

We had swept together quite a lot of property.I think it was about $65 or $68 million presale or something like that. We soldabout three-quarters of the material, and it was a highly profitable event.

Soin aggregate I can only characterize it as a piece of business I would bereally happy to have any day of the year.

Theirony is, having followed this for a long time, obviously those types of sizesused to be the evening sale sizes. Interesting perspective.

Ithink you can also say that those sorts of events are very often on a profitand contribution basis, close to or as significant as some of the mostglamorous sale events that to some extent you can view as couture versus ready-to-wearin other worlds because there is a lot less exotic financial work going on.There is less hysteria surrounding the property collecting, and they are muchmore consistent and predictable events.