Analyst Conference Summary

conference date: June 27, 2007
for quarter ending: March 31, 2007 (1st quarter)

Note: A conference was held May 1, 2007 ( See Summary) with preliminary Q1 2007 results.

Forward-looking statements

Overview: The negative surprises were back in to the December 2006 quarter, so Q1 2007 looks pretty good. Guides to modest Q2 improvement.

Basic data:

Revenues of $391.3 million are sequentially down 4% from $408.9 million and also down 2% from $400.8 million in Q1 2006 (excluding former Grenoble operation).

Net income was $28.9 million, up from $4.7 million year earlier. Earnings per share were $0.06, up from $0.01 year earlier.

Cash position grew by $34.5 million to end at $478.7 million.

Guidance:

Q2: 1% to 4% increase in revenues sequentially.

Conference Highlights:

Net income included a tax benefit of $20 million from French R&D tax credits.

4th quarter fiscal 2006 had a net loss of $122.6 million including asset impairment, restructuring, and other charges of $121.2 million. [In other words, they stuck all their charges in 2006].

They are now current with SEC filings and "anticipate regaining NASDAQ compliance shortly."

Restructuring announced in December 2006 had some impact in Q1 results.

Revenues by type: ASICs $111 million; microcontrollers $108 million; memory $86 million; RFID and automotive $86 million.

Gross margin was 35.8%, up from 31.5% in Q1 2006.

Operating expense was $125 million. Stock based compensation was $3 million. R&D $67 million. SG&A $58 million. $21 million Cap Ex. $32 million depreciation and amortization.

Long term debt decreased $23 million to $146 million.

Business strenthened thoughout quarter. Europe did best. Americas flat, Asia down. Growth now coming from Asia and Europe.

Irving Texas manufacturing facility sold to Maxim for $38 million. UK fab will be sold this year, they believe.

Q&A:

Target model? Gross margins this year to rise to upper 30's by end of year. Operating expenses in Q2 will have a lot of one time expenses, including accounting restatement; SG&A above $64 million. Then run rate in Q3 and Q4 will be $53 to $54 million for SG&A.

Gross margins to be flat sequentially from Q1. After Q2 improvement will be from better utilization at fabs. In 2008 expectation will see manufacturing improvements including outsourcing. Also loss of largest customer will be made up with better margin business.

Utilization rates? In 2006 second half were 95% plus, in Q4 97% to 98%. In Q2 will be only 75%.

EEPROM pricing? A healthy business for us. Sees no drop off with respect to expectations.

Share buy back, capital structure? Under $300 million would be sufficient cash. Open to ways to maximize shareholder value. Could not do a lot with current cash balance.

Long term margins? Gross margin 45% plus. Will require a lot to get there. 15 to 20% operating margin.

Segment margin changes? Microcontrollers strengthening a little because of AVRs. ASIC is struggling with pricing on smartcards. RF & automotive stays stabile, maybe a bit of upside. Non-volatile memory fluctuates, but on the whole stays even.

Automotive design wins? Just getting AVRs into that segment. Last year was 1% of microcontroller business, this year could go to 3%. Design wins from last year are ramping now. Still a very small business.

Texas factory? Wrote down to fair market value last year, which is about what they got paid for it.

Inventory issues? In Q1 built microcontroller inventory in anticipation of closing UK plant.

2007 depreciation? About $130 million.

Normal tax rate is $6 to $7 million per quarter, mainly paid in Europe.

$81 million Q4 restructuring charge? Mostly impairment of UK fab, so not cash, and on sale of asset there won't be a loss.

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