Good afternoon. My name is Morgan and I will be your conference operator. I would like to welcome everyone to the Xilinx Third Quarter Fiscal Year 2014 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Rick Muscha. Thank you. Mr. Muscha, you may begin your conference.

Thank you, and good afternoon. With me are Moshe Gavrielov, CEO; and Jon Olson, CFO. We will provide a financial and business review of the December quarter and then we'll open the call for questions. Let me remind everyone that during our conference call today we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information as currently available and that actual results may differ materially. We refer you to documents the company files with the SEC including our 10-Ks, 10-Qs and 8-Ks. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This conference call is open to all and is being webcast live. It can be accessed from our Xilinx Investor Relations website. Let me now turn the call over to Jon Olson.

Thank you, Rick. In the December quarter, Xilinx sales were $587 million, down 2% sequentially, which was at the low end of our guidance range. 28 nanometer sales were particularly strong during the quarter reaching a $100 million with material sales from all product families. Broad-based Kintex sales led the growth with the significant contribution from Virtex and Zynq sales more than doubled. Sales from the Mainstream and Base categories both declined sequentially. From an end market perspective, sales from communications and data center were approximately flat in the December quarter, slightly lower than we had forecast. Strong wireless sales associated with China LTE deployments were offset by weaker than anticipated telecom and data center. Top tier wired customers performed as expected but the weakness came predominantly from our mid-tier customers. Industrial and aerospace and defense sales declined as expected driven by industrial, scientific and medical and test and measurement. Aerospace and defense business was approximately flat better than expected due to strength in a couple of un-forecasted programs. Lastly, broadcast, consumer and automotive was slightly down driven almost entirely by expected declines from consumer. Gross margin was 69.2% for the quarter in line with our guidance of 69%. Operating expenses were 203 million including amortization of 2.6 million. Also included in the operating expenses was a $19 million reversal of a contingent litigation reserve associated with a settlement of a patent litigation matter that was previously charged to the P&L in both Q4 FY12 and Q2 FY14. Other income and expense was a net expense of $5 million, less than forecast due primarily to higher dividend and interest income associated with our investment portfolio. Net income for the quarter was $176 million or $0.61 per diluted share including a $0.06 per diluted share impact associated with the previously mentioned…

[Operator Instructions] Our first question comes from the line of John Pitzer with Credit Suisse.

Jon, you said in your prepared comments that you thought in the March quarter that wireless would be in a record. I am kind of curious, how much is China LTE now as a percent of the comms? What kind of sequential growth do you think you will see and every time we hear record, I guess we in Wall Street start to worry about kind of a peak and so I am kind of curious as to, versus the potential of where you think this could go, where do you think the March quarter will be?

John, well thanks for this question because I kind of had the same thought process and I was hoping someone would ask this question about it. This is far from where we think the peak is going to be. I think I would like to kind of take you back a little bit in our last time we had a peak was I would say around the peak of the 3G rollout in China, but the dynamics are a little bit different here for LTE from the standpoint of, we have been participating on a regular basis in the rollout in other geographies beyond China and we continue to have a really good solid business underneath that and then we started layering China on top of that and then later on Europe kicking-in where we actually see a few more little finds that things moving forward there. We are expecting wireless to be well above our historic peak as the LTE rollout hits us over the next several years. So, we're looking really very forward to that. If you look at our overall communications business we were I'd say a little bit disappointed because we were flat and that was really because wireless was up and wired was down. And the incremental part driven by China was a significant driver of that growth. We really don’t want talk about the specifics of exactly how much is in China and not, but quite frankly we are in the very beginning stages there. And with respect to the guide for next quarter and talking about that we are seeing all OEMs come to us with orders and discussions about the long-term supply chain of what they think they need. Now that doesn’t mean we have good have visibility, it just means that they are saying while things are turning on now in China and we need more parts for March and beyond, what is the prognosis like that from a capacity perspective. So, I think we really are just now getting in to the beginning of an aggressive ramp here although it will be hard for us to forecast quarter-to-quarter most likely.

Thanks.

Next question please.

Next question comes from the line of Vivek Arya with Bank of America.

Thanks for taking my question. I actually had a clarification question for Jon and the real question for Moshe. So, on the clarification Jon, if wireless remains the key growth driver in 2014, should the model gross margins to be closer to 68% rather than the 69% i.e. will the other quarters look similar to what you are guiding for March in terms of gross margin? And then the question for Moshe, Moshe if we look back a number of years we have seen this PLD market share shift at almost every node. You guys are very strong at 65%, Altera at 40% then you were at 28%. What caused that before and why can’t that same thing repeat whereby Altera starts to gain some momentum, what do you see to give you confidence that that same thing will not happen again? Thank you.

So, on the overall gross margin forecast, I am really not going to forecast the next quarter or the next year, we will definitely talk about that at the Analyst Day that’s coming up in a couple of weeks but we are very confident about our gross margin position. And when you think about the -- I'll say the more abrupt growth of our product -- 20 nanometer product generation, we are not at the -- we are not down the cost curve totally here, right. So, we are talking about an acceleration of fast shipments, a lot of shipments early in the generation of the product. So, we're still very confident about our gross margin position on a go-forward basis and this is not kind of the harbinger of some lowering in the short-term quite frankly albeit there will be up and downs and some fluctuations around the midpoint and this is just one of those situations.

Vivek, thanks for the question. We'll give you a more profound answer on the February the 11th as to what we are doing to maintain and continue our leadership. I don’t think there is a physical rule of nature that says that you need to swap leadership, it all depends on what your strategy is and how well you execute. And this point in time I am very confident that we are doing everything to retain and expand our leadership but we'll go into more detail in February. Thanks for the question.

Next question comes from the line of Romit Shah with Nomura.

Yes, thanks a lot. Jon, I was hoping to just get a little bit more color on the gross margin weakness. You highlighted Kintex, but my understanding is this product line has been growing as a percentage of sales and obviously you guys had very good gross margin performance last year. And then Moshe on 28-nanometer, you highlighted your current share at around 70%, do you think that’s a number you can sustain through the remainder of this year? Thanks a lot.

So, while it is true we have been growing 28-nanometer quite profoundly but you also have to look at the end market mix as well as the product mix. And so it isn’t clearly just about Kintex, how many Kintexs was resell, it’s also an end market exposure and the wireless end market because of the concentration of costumers and the very high volume that we're shipping in there, there is definitely a pricing discount versus cost perspective there and we talked about the fact that our wireless end market has had gross margin characteristics lower than some of our other end markets. And so to me this is really a transitional product end market mix as that will work itself out over time.

And with regards to market share going forward, our public goal was 60%, our internal goal was 70% we've grown over the past -- the product taped out in 2010 and now has three years of production; it’s grown from 50% to 60% to 70% market share over the past year. We’re going to continue to do everything with the breadth of the portfolio to capitalize on that. And I am delighted with where we are and we intend to continue to provide this leadership whether it’s 70 or around 70, it’s going to be much higher than it ever has been at least for us. And it’s in the breadth and depth of the product offering which is the level of execution which are second to none. So I think there are sustainable elements there, it’s not a fluke it’s not one element of the product offering, it’s not prototyping, it’s not wireless. It’s a whole host of things which are hitting at different times and are accumulating to deliver this and next station is that they will continue to hit as we continue going forward. We will also address some of these issues in February in more debt.

Next question please?

Our next question comes from the line of Tristan Gerra with Baird.

Is this trend of Kintex relative to your expectation implying that perhaps there is a mix shift versus prior node where demand is stronger in the mid-range than it used to be? And if that’s the case do you think that the market will give the high end of 28 centimeter more than half of the geometry node as it has been in the past.

So Tristan excellent question, there is a transitional just happening and that is, there is an emerging need for a higher performance, more cost oriented product and there are certain markets that if that product doesn’t exist they just won’t use a low end product and they won’t use a high end product, because the low end product won’t have the right performance, the high end product won’t have the price, so they will evidently use something else. So I do believe that there is a place for this, it is growing at a rapid rate, it is to some extent in some cases replacing the high end, so we do expect the percentage of the high end to be smaller than it has, having said that, we believe that primarily the high end benefit and the same expansion there is through replacing [indiscernible] for applications such as [indescribable] et cetera.

Our next question comes from the line of William Stein with SunTrust Robinson.

I am wondering if you can comment a little bit more about the consumer end market, I think you highlighted that end market as a weak spot in the quarter ended the outlook, can you elaborate?

Yes the consumer end market for us does have underlying trends that happen as the introduction of I'll say high end electronics come to the market. And one of the biggest applications that’s been going on in addition to more pro-consumer video cameras and things like that, it really is around next generation televisions which is around the ultra-high definition and 4K 2K television. And we've been doing extremely well in that market, we have traditionally when new television technology comes out, we traditionally have played a role in that and this particular movement that’s going on or evolution that’s going on, we’re in a very well position and these trends tend to last for a year or so and then generally when they get into extremely high volume televisions, that will [indiscernible] or some other kind of technology. So we are kind of in the middle of enjoying that ramp and because of the difficulty of trying to get this technology to work by the television manufacturers, [FPJ] has turned out to be a really useful thing even in I'll say the small to medium volumes now which is a little bit different than previous -- over the previous generations.

Our next question comes from the line of Glen Yeung with Citigroup.

Thanks, Jon. You made the point in your prepared remarks that wireless is coming to a record level on the March quarter and yet you’re guiding overall revenues could be below consensus. I wonder if you can then talk about the prospects you see for your business outside the comms and whether or not you think consensus is actually missing something in the way you think about revenue growth for 2014?

So, I think that it’s an interesting question, while we do see some modest growth in some of these other stuffs end markets I’ve talked about, the biggest move is actually are going on in communications for us next quarter and coming from a down quarter in the wired side, the compare is easier for us to go up a little bit, but quite frankly the wireless part of the growth is a much bigger percentage of our forecast for next year. And so I’ll talk about this a little bit more in a couple weeks but as you step back and look about -- look at where we thought we would go, have revenue this year going into the year and where we’re ending up, we're actually extremely pleased and that delta is explained by the 28-nanometer growth that Moshe talked about in his remarks on a full year basis. We’re doing extremely well. Adoption is as good as we thought and while there are pockets of slowness and ramping in some areas, we have other pockets where people are ramping at a much more rapid pace than we thought. So don't take too much on this record wireless comment, it was put in there primarily to signal the fact that we have such a strong play this time in the wireless sub-segment as a result of our Kintex and Zynq products that we are getting a significant share this time of this new generation of technology on a worldwide basis in a much bigger show than we did in previous node generation. Next question please.

Our next question comes from the line of Srini Pajjuri with CLSA Securities.

Thank you, Jon. I want clarification on a question. First, did you have any 10% customers or do you anticipate any in the March quarter and then the question is you mentioned that the mid-tier telecom and datacenter customers for a week, if you could give us a little bit more clarification as to what’s going on there, looks like you’re expecting that customers to come back again in the March quarter? Thank you.

Yes and the answer of your first question is no, we did not have a 10% customer this past quarter and we don’t forecast whether we are for the future. We are open for business so we’ll take orders from anybody, maybe we’ll end up having one who knows, but if you look at our history we really have that because we have such a broad-based balance around our customers, but I guess we’ll have to wait and see about the March quarter. From a mid-tier comms perspective, some it is customer specific to some things that we -- the customers were clearing out inventory in two or three places and some of it are -- is I think an explanation of that the overall economy and IT spend is not as robust as we might like it to be or thought it to be. Our new customers continue to deploy new technology very rapidly and so that’s been the harbinger for strength there. The mid-tier and smaller customers not quite as much there and their growth is still depended on legacy designs that really aren’t moving quite as well, so a few customers that are doing inventory correction and a few customers that I think have had overall weak demand and so there is a bit of a pause there.

Our next question comes from Christopher Danely with JPMorgan.

Thanks, guys. Hey Jon or Moshe, can you just maybe run through your major end markets for this calendar year in which you expect to grow the most or the least since you’ve seen the indicated -- China communication was pretty much as you expected last year, what would you expect from the comm business and maybe the China communications business this year?

So, Chris nice try, February 11, San Francisco, we’re going to talk about the whole year, the markets break them down et cetera. Now it’s just -- so I won’t appear to be rude, 28-nanometer is driving our growth wireless and wired are benefiting incredibly this current quarter and what we’re seeing is that expansion into other markets is happening at each market at the natural rate that it happened. So for example just a measurement we used, the largest FPJs really early, we continue to see that on an ongoing basis because we have the largest most popular ones, but then it gets deployed on a broader basis, so we would expect that over time to grow. Why it takes a little longer to go into production but thankfully its happening, wireless, the success is extremely broad and to the extent that you should see growth and wireless as the one which is happening at the fastest rate due to the very strong product cycle, but we will give you more details, we just -- you know we’re not going to have anything to tell you on February 11th except give you another book which you may or may not appreciate.

Our next question comes from the line of James Schneider with Goldman Sachs.

Good afternoon, thanks for taking my question, relative to the China wireless ramp, I was wondering if you could talk about the -- the mix of products you’re shipping into base stations versus radio heads and whether you expect that to change a lot over the next few quarters as some of the complexion of the deployment changes, and then can you maybe talk about, when you expect 20 nanometer revenue to be material to the P&L, is it going to be as much as the year out or is it going to be sooner than that?

On the China wireless composition you know clearly radio cards are the leadership in terms of volume and we are getting a lot of this business is around radio heads and radio cards, so there’s a lot of that activity from an ordering perspective. And baseband and back haul are the other two wireless segments which account for I would say the remaining 50% if you will, the 50% of radio, pardon, 50% of the other. And we are getting certainly getting baseband orders coming through et cetera, and backhaul I would say would be the last in terms of the percentages, so it’s a bit of an overweight towards radio right now in terms of the deployment which I think is the most critical part to get the new frequency, the new bands deployed from a carrier perspective. So I would say that’s what’s going on now, and I would expect that to moderate over time but still a radio leaning for the next few quarters. Then with respect to 20 nanometer materiality, it’s a year out, I mean if it’s supposed to be handicapping over under a year, it’s a year out, I mean we’re shipping for revenue today, our first product that we take out, but it’s going in the customer’s prototype wars and things like that, our design win activity is picking up significantly in this area but realistically any significant revenue is out of here anyway.

Yes, and Jim just to clarify that further, you just need to look at 28, that’s the fastest growing node we’ve seen, we’re at $100 million, that’s 16% of our revenue and this is three years after we taped out the product, the nature of the markets we service is it takes some time to get the product inserted into the customer designs and they typically deploy on a delayed rate so, you know in this case it took three years to reach $100 million and that’s the fastest it’s been done before, so in terms of having some revenue which is significant then here is a good element and in terms of getting 15% I think you can model, three years is a good proxy for that, and you know. So the question is how do you define significant? Is it 3% or 15%? If it’s 15% use three years. If it’s 3% then that can happen much faster.

Our next question, please.

Our next question comes from the line of Joe Moore with Morgan Stanley.

Great, thank you. I wonder if you could help us size the Zynq opportunity. You mentioned it doubled sequentially. If you can just give us any kind of qualitative estimate of where that is, and if you’re not willing to do that, just kind of help us understand where it could go over time.

Okay, we don’t break it out. It’s still small numbers as in just under $10 million and it was the last of the families we introduced and it was a totally new concept with leadership, what we’re finding and this is not surprising is that the designing cycle, because of the software involved, it has an embedded processor, processor takes longer. Our expectation is that in a year or so it will move, the numbers will be much higher. Now what is driving that is wireless and secondarily automotive. Automotive takes a little longer because it’s dependent on model years on that’s a slow moving industry and so it will grow during this year. I’m very confident of that driven by wireless but more accelerated growth driven by other markets, primarily automotive and then industrial is going to happen next calendar year.

Next question, please.

Our next question comes from the line of Ambrish Srivastava with BMO.

This is Gabriel Ho calling in for Ambrish. I’m just wondering if you can comment on last time buy, if there is an impact on the revenues of gross margins for the December quarter and also where are we in terms of the last time buy.

Sure Dave. As noted, our base product family continue to decline as if you look back over the last several quarters we have and that’s where the specific set of parts that we’ve been holding for customers for an extended amount of time due to the BAB [ph] line closure situation, that we were -- we had to deal with respect to our foundry. And so while -- as I stated before we’ve always had underlying quarterly run rate going on here and the shipment of that inventory, we’ve been building up over the last several years will continue at least through the remainder of next fiscal year, and it is dependent on when customers take it or when they’ve agreed to take it and all those things have been worked out. So with respect to the December quarter, we definitely had shipments there. I’m really not going to talk about any specific customers or parts and its impact on margin. But quite frankly, with the base products continue to decline you got to believe the underlying run rate there has been more or less constant with some preservation as depending on customer need. So it’s about all I think I can give you on that particular topic.

Next question please.

Our next question comes from the line of Alex Gauna with JPMorgan Securities.

That’s JMP Securities. I was wondering if you could talk about, last quarter you guided turns to 53%, came in at the low end of guidance, now you’re at 54%. I am wondering was it programs that you had anticipated coming through maybe got pushed out a little bit or was there a turns area that you missed a little bit more that you think is going to come through in this quarter? And just to clarify, last quarter you talked about initial signs that things were picking up in 4G China infrastructure deployments and you’d expect the acceleration in December. Did you get that acceleration in December and as a part of the strength in the March quarter, is that acceleration continuing? Thank you.

Sure Alex. Relative to the turns number, it is always a bit of an art when you have as many customers as we have in different design cycle wins and you only know less than half of your -- you have less than half of your business booked probably in the quarter. So there is all kinds of puts and takes that got under in the quarter with customers pulling things in, pushing things out based on their scheduling and their ultimate demand needs. And I think the reason in my remarks I talked about weaker mid-size and smaller customers in the wired, meaning the networking and telecom space was really that; we had anticipated orders from some of those customers at a greater level than we’ve actually received. And distribution in certain geographies were a little on the light side of what we had anticipated and some of those go into the smaller wired customers. So it really was more around that comms flavor than any other single area that I can point to. And if you go back and look at our history in terms of percentage of turns, anything in the 52% to 54% is right in the wheelhouse of where we have typically ended up. And again I talked about some of the customers that were weaker in this past quarter are going to be strong this next quarter. That is also an estimate on our part, because we don’t necessarily have hard orders for everything. From a 4G pickup there is no -- in China there is no doubt that we had increased revenue in December over the September quarter and then we have another step up again in March. This in my mind is very consistent with what we’ve been saying over the last five or six quarters around how China is going to start slow and accelerate versus have some rocket ship going on in one quarter, that’s been our view all along, and I think at least through December we’re on track to where we thought deployments would be, and the speed and the pace of what’s going on and we’re very early in that whole process.

Thank you, next question.

Our next question comes from the line of Ruben Roy with Mizuho Securities.

Hi. Thanks. Moshe, given that there is still a bunch of new designs going on for 4G infrastructure, I’m wondering if anything has changed with the FPGA content, relative to 3G? I think historically we’ve talked about some sort of multiplier on total dollar content. But given the mix kind of moving, it sounds like at least in this initial run of designs to Kintex-7, do you think anything is changing?

Well, Kintex-7 was architected and executed to be the ideal and de facto standard FPGA solution for wireless and in particular for 4G. So we see the level of integration inside the FPGA growing across the board. So the percentage of developed materials which is covered by the FPGA is growing. You’re right in highlighting that 4G is going to be deployed over several years in several geographies. China is getting huge level of attention now and that after there was some deployment in North America, which isn’t yet complete and some deployment in Korea, which actually is more or less complete, and Japan which is further along, the rest of the world needs to catch up. Amazingly I just spent some time in India and it appears, and I know that everyone -- the India deployment of technology is like Verizon, the closer you get to it, the further it goes away. But we live in hope. And after I was there, and I saw firsthand, how bad the coverage is, and I was in seven cities, it was bad everywhere. The expectation is that they are going to more or less skip 3G. So they are going to terminate their 3G deployment and then hopefully they will skip straight to 4G and the expectation is that that will happen some point in time after the elections which is due, I think in April or May of this year. I know that isn’t a great hope, but well I am using, the reason I am using that is it’s an example of how long this 4G deployment is and how distributed and fragmented it is over the world. And what is happening is, is actually the next generation after that where there is already rumblings of deployments, which I believe is going to be led by Korea. So, that’s a long answer, FPGAs is more and more central to these devices and they have a larger portion of the developed material. So it looks good. I am very bullish on wireless infrastructure deployment.

Next question please.

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Thanks for joining us today. We have a play back of this call beginning at 5 p.m. Pacific Time, 8 p.m. Eastern Time today. For a copy of our Earnings release, please visit our IR website. Our next Earnings release date for the fourth quarter of fiscal year ’14 will be Wednesday April 23, after the market close. This quarter we will be holding our analyst meet on February 11 in San Francisco. We look forward to seeing you there. In addition we will be presenting at the Goldman Sachs Technology and Internet Conference on February 12, and the Morgan Stanley Technology Media and Telecom Conference on March 4. This completes our call. Thank you very much for your participation.

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