Analyst Conference Summary

conference date: July 25, 2007 @ 8:30 AM PT
for quarter ending: July 1, 2007 (fiscal Q4 2007)

Forward-looking statements

Overview: Sequential revenue increase, but still down year-over-year; lowered share count from buy-back increases EPS.

Basic data:

Revenues were $268.1 million, up 5% sequentially from $255.0 but down 8.5% from $292.9 in Q2 2006.

Net income was $95.7 million, down 3% sequentially from $98.5 million and down 17% from 115.7 million year-earlier.

Diluted EPS (earnings per share) were $0.36, up 12.5% sequentially from $0.32 and up 3% from $0.37 year-earlier.

Cash ended at $633 million and now has significant debt.

Guidance:

Revenues to increase 4% to 6% sequentially and "to have EPS increase more in the high end of this range."

Conference Highlights:

"Orders placed ... increased during the quarter and we had a positive book to bill ratio." September quarter typically slower from industrial and communications infrastructure, stronger for consumer segment.

$3 billion of stock was repurchased using $1.3 billion cash and $1.7 billion convertible debt. Therefore interest income has decreased and interest expenses increased. Net income for the quarter was decreased by this.

Full year 2007 revenue was $1.08 billion, down 1% from previous year.

Non-GAAP EPS for the quarter was $0.42 based on non-GAAP net income of $109.9 million.

Cost of sales was $61.3 million. Gross profit was $206.8 million. Operating expense was $79.6 million (R&D $46.7 million, $SG&A 32.9 million). Operating income was $127.2 million, up 6%.

Effective tax rate was 23%, down from 28% in prior quarter due to several issues resolved with IRS. But expect to be 29.5% going forward.

77.1% gross margin; down from 77.8% in Q1. 47.4% operating margin.

Cash declined by $1.175 mainly for stock repurchase.

Inventory is at normal levels at $51.1 million. Reduction in customer inventories appear to have ended, but remain cautious.

Asian bookings improved, but Europe was down modestly. Flat in USA at 32% of revenue.

Bookings in quarter:

Industrial 32%
Communications 33%
Computer 12%
High end consumer 10%
Automotive 9%
Military & Space 4%

One week shutdown at beginning of quarter at domestic wafer fabrication plants led to slight decrease in gross margin.

Net interest expense in Q3 estimated at $9.3 million.

Plans to spend $60 million in fiscal 2008 for capital additions (buildings and plant).

Overall global semiconductor market is not growing rapidly, but is returning to growth.

Q&A:

Pipeline by end markets? New product efforts are not targeted to specific end markets; looking for good margins. More effort in Automotive market.

Micro Module effort? Has first product two years ago, now have a family, getting design wins and sales growth.

Gross margins? Expects some improvement in Q3 since no shut down planned.

Pricing in marketplace? Always see pricing pressures. Drops unattractive business. No change with pass.

US distribution? Flat. But more and more customers are taking distribution overseas.

Backlog at end of quarter? $112 million. Turns 60%.

3G handset designs? Feature rich cell phones, we participate in only well known example to date (iPhone), but we have not seen a lot of other opportunities yet, but may in Q3.

Lead time issues with competitors? We have not seen that here; we are very consistent with lead times.

Conversion price on new debt is roughly $50, at that point shares would be dilutive.

Reason for increased projection for 2008 cap ex? Looking to do some expansion on a process in one of the fabs.

Operating profit going forward? Could see getting to 50%, that is not that much over the current 48%.

Automotive market? Yes, we have had design wins leading to increased sales recently and going forward. Automotive market has increased its need for analog circuits.

Use of new cash flow? Still committed to dividend, may pay down debt, eventually could do more stock repurchases.

Telecom? Did improve by 1%. Doing well with high speed data converters and other new products.

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