Analyst Conference Summary

conference date: April 16, 2008 @ 2:00 PM Pacific Time
for quarter ending: March 31, 2008 (1st quarter 2008)

Forward-looking statements

Overview: Much better than expected quarter with good sequential and annual revenue growth.

Basic data:

Revenues were $336 million, up 4% sequentially $323 million and up 10% from $304 million year-earlier.

Net income was $84 million, up 29% sequentially from $65 million. and up 12% from $75 million year-earlier.

EPS (earnings per share) were $0.27, up 35% sequentially from $0.20, and up 29% from $0.21 year-earlier.

Guidance:

For Q2 2008, expects sequential revenue growth of 1% to 4%. Gross margin near 65%. Diluted share count 305 to 310 million. 16 to 17% effective tax rate.

Conference Highlights:

Share re-purchase plan completed in quarter with $275 million spent on 15.5 million shares. Cash flow from operations was $150 million. Cash and equivalents ended at $995 million.

The quarterly dividend was raised to $0.05 per share from $0.04.

New product sales grew strongly. Stratix III FPGAs, Arria GX tranceiver-based FPGAs, and MAX IIZ CPLD lines have all been well received. Cyclone III revenues were up 73%, Cyclone II up 15%, Stratix III up 198%, Stratix II and GX up 21%, Max II 17%. But HardCopy decreased 28%.

Book to bill was greater than 1 and there was a high backlog.

Cost of sales was $117 million. Gross margin $219 million. R&D expense $58 million. SG&A expense $61 million. Income from operations $100 million. Other income net $1 million. $17 million income tax provision.

65.1% gross margin was up 1% sequentially due to improved mix. 8% sequential industrial revenue growth. 28% operating margin (excluding NQDC effect).

$268 million R&D expense expected for full year 2008, with second half slightly heavier weight. $527 million total 2008 operating expense (excluding NQDC)

Inventories decreased by $3 million to $71 million. Accounts receivable increased $32 million to $231 million.

By geography, North America has 23% of revenues, Asia Pacific 32%, Europe 23%, Japan 22%.

By product category, new products were 40% of revenues, mainstream were 27%, mature 33%.

By sector, communications were 41% of revenue, industrial 35%, consumer 15%, computer 9%. Communications grew 4% and late in quarter Asian sales spurted. Industrial grew 8% sequentially. 90% of our revenues are from infrastructure end-markets. We have grown faster than our end markets because of replacement of ASICs with our products. Expect communications to continue to grow in Q2, with consumer and computer flatish.

40nm products to be introduced this year.

72% of revenues were from FPGAs, 19% CPLDs, 9% from other.

Long term goals are 10% to 15% annual revenue improvement, 30% or better operating margins, and 30% or better return on equity.

Q&A:

Linearity in quarter? Stronger for us at end of quarter, particularly Asian communications.

Lumpiness of business? It is rare for us to have backlog that takes 6 months or more to go out. We don't want to give guidance more than 1 quarter at a time right now.

How much more cost cutting can you do? This year things are tightened down, we are not likely to do better than guidance on operating expenses this quarter. Culture of company is coming around to everyone looking to improve our profitability.

Deferred income? That tends to go up in periods of rising sales even if inventory in channel is consistent with usual turn times.

Intentions for cash, given continuing growth? Dividend has to be paid out of U.S. cash, which is at a workable minimum already. We want to generate more U.S. cash. We will look for growth opportunities and enhancing our capital structure.

Cost cutting measures? We are now 25 years old. We accumulated a lot of policies and procedures that need to be looked at again.

Is Japan strength sustainable? Commucations was expected strong and it was. NGN and wireless deployments are expected to continue this year, so near term we think will continue to be strong.

40nm process? It is 40, not 45. On schedule with TSMC. No announcement yet on products, but will ship some time this year.

Visibility is low, we do get forecasts from major customers, but so many things can change we don't think it is helpful to give specific guidance beyond one quarter. PLDs are a rapid turnaround product, that is the whole point, so long term visibility is limited.

None of our products is pin-compatible with competitors, so it is important to get design wins. Pricing is competitive for design wins but then customers are locked in so it stays stabile.

Changed methodology for guidance? We guided low last two quarters. Intend to give accurate guidance. Therefore broadening range of guidance.

New communications deployments? 2G and 3G are going strong. WiMax trials continue.

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