Analyst Conference Summary

conference date: January 31, 2008 @ 2:00 PM Pacific Time
for quarter ending: December 29, 2007 (2nd fiscal quarter 2008)

Forward-looking statements

Overview: In contrast to most semiconductor manufacturers, Maxim had significant year-to-year revenue growth for its December quarter. On the other hand it is still doing an accounting restatement, so only limited date was released. Also guided to very weak fiscal Q3.

Basic data:

Revenues were $540.0 million, up 3.3% sequentially from $522.7 million and up 8.6% from $497.5 million year-earlier.

Net income and EPS were not available.

Guidance:

Fiscal Q3 revenue of $475 to $495 expected due to 9% decrease in bookings in Q2 and normal seasonality.

Cautious about short-term revenue outlook.

Conference Highlights:

Met or exceded guidance for all key metrics. Cell phone, computing peripherals, and consumer entertainment segments led growth.

Sequentially consumer, industrial and communications end markets were each up mid-single digits, while computing market was up slightly. Computing revenue 31% of total; consumer 29%; industrial 21%; communications 19%.

Total cash and equivalents decreased by $180 million in the quarter, despite strong cash flow from operations. Goodwill payments for expired options of $94 million, income tax payments of $106 million, $63 million for acquisitions, $60 million for dividends and $77 million for property and equipment, together led to the decrease.

Because capacity was brought online at Epson, the Dallas fab is being ramped down and closed. Once complete cost savings should be $18 million per year. Research for the handset RF receiver line is being discontinued. A one time charge of $10 million for restructuring is expected. But $15 million decrease in annual R&D should result.

Non-GAAP gross margins improved 50 basis points (0.5%) sequentially because of inventory control.

Operating expenses increased 2.9% on a non-GAAP basis. $9 million in non-recurring items.

Inventory declined for second consecutive quarter.

$65.9 million in capital expenses.

Net realizable bookings $476.4 million, down 9% sequentially due to seasonality, plant fire at a key customer, and macroeconomic uncertainty. There was a $303.5 million backlog at the end of the quarter.

Will increase investments in product lines that have the best growth prospects. In computing market notebook unit sales are growing at 20% a year; we are having significant design wins with single chip battery controllers and other components. Consumer segment is our best growth opportunity: UMPS cell phones in particular. Baseband communications is also a growth opportunity and we have seen design wins. Also working on electric car battery control system designs and medical ultrasound.

Q&A:

R&D cutbacks were made because some areas no longer look as promising as they did when we started research. We are looking for new potentially profitable areas.

Particular weakness in demand? Short term visibility is poor. Our customers are concerned about the macro-environment. We used, a few years ago, focus less on consumer business.

Why did you not go up more in Q4 from seasonality? We did have a 3% sequential increase. Normal seasonality from Q1 to Q4 depends on the mix of business, which is continuing to evolve for us. We are still one of the fastest growing analog companies.

Industrial and communications markets in March quarter? Industrial will probably be about flat, and communications as well.

Where are you seeing market share gains? LCD displays, battery management, analog baseband circuits for cell phones, ATE market, automotive market, ultrasound.

January bookings? Do not give that information. Not trying to predict bookings for the quarter at this point.

Plant fire, when would revenue be recouped? Don't want to quantify, but they are getting back on line for June quarter. We will ramp sales as they ramp production. Greater than 1% but less than 3% of revenue.

Pricing trends (ASPs)? Constant sequentially.

Fabrication strategy, internal v. external? 25 to 30% external, the rest internal.

Blood glucose meters is another area we are developing with some success.

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