Fiscal 2010 Earnings Conference Call. On today’s call, our Chief Executive Officer, Carl Everett and Chief Financial Officer, Rich DeLateur. Before we begin, let me remind you that the company will be discussing GAAP P&L results and some key non-GAAP results to supplement understanding of the company’s financial. A schedule that provides GAAP to non-GAAP reconciliation is available in the press release issued today and also on the investor section of FormFactor’s website. Also a reminder for everyone that today’s discussion contains forward-looking statements and that FormFactor’s actual result could differ materially from those projected in our forward-looking statements. The company assumes no obligation to update the information provided during today’s call, revise any forward-looking statements or to update the reasons, actual results could differ materially from those anticipated in forward-looking statements. For more information, please refer to the risk factors discussed in the company’s form 10-K and subsequent forms 10-Q and in the press release issued today. With that, we will now turn the over to C.E.O, Carl Everett.

Thank you and hallo everyone. FormFactor plays an important role in the semiconductor industry by enabling our customers to improve yields, lower overall costs of tests and deliver highly reliable semiconductor devices for all competing applications. We have just begun the work required to transform FormFactor performance around. As a matter of fact, I expect the next two quarters to show incremental improvements as we position the company for better results in 2011. I am organizing the work in front of us in step with strategic objectives I am setting for the company. Within the strategy framework, we will set detailed targets and goals to measure our progress and drive to results. For example, Rich will be discussing our key financial targets regarding cash burn, gross margin and OpEx. Our long term guide focus to work toward is 50, 30, 20, which means a 50% gross margin, a 30% operating expenses as a percentage of revenue and 20% operating profit. Let me describe the strategic framework. Our first objective; take care of our core business. We are the number one supplier of advanced wafer probe solutions for the DRAM industry. In this role we have several paths to address; first our product line and architecture is changing. We are transitioning from the harmony generation products to a smart matrix and touch matrix product lines. We have notified our customers of end of life plans for Harmony and will begin accepting last time orders at the end of Q3 2010. The new products enable our customers to achieve better yields and therefore our lower cost of ownership solutions. We are in or have completed the qualification phase of this transition at all of our customers. I am pleased to report the products are well received and coming on line to production.…

Thank you Carl, I will begin with summary of our second quarter results. Total revenue was 57.6 million, up 45% sequentially and 85% on a year-over-year basis. Total revenue included 2.9 million from net change in deferred revenue. Revenue growth came from all three sectors of our business and details as follows; Second quarter revenue for DRAM products was 42.4 million, up 33% from our first quarter and 68% verses the second quarter a year ago. Flash revenue was 8.4 million, up to 144% from Q1 and 355% verses the second quarter a year ago. Both NAND and NOR revenues saw strong growth, with NOR being the larger part of our flash revenue at $6 million. SoC revenue was 6.8 million in the second quarter, up 54% sequentially and 67% worse than the second quarter a year ago. Revenue from our new product architecture, Smart Matrix and Text Matrix, was 12.3 million, up 71% quarter-over-quarter. Our matrix products were 21% of revenues in the second quarter versus 18% in the first quarter. Moving down the income statement, second quarter GAAP gross margin was $2.9 million or 5% of revenue. On a non-GAAP basis, gross margin from the second quarter grew 7%. This non-GAAP gross margin of 7% compares to a negative non-GAAP margin of 3% in Q1, providing 10 points or 5.3 million of margin improvement. One would expect a larger increase in gross margin due to increased revenue. But the margin was offset by additional cost of goods sell charges not associated in production, including start up costs from the second quarter manufacturing facility. On a GAAP basis, operating expenses soared to 37.2 million including 2.5 million of pretax restructuring charges. Excluding these restructuring charges, the GAAP operating expenses were higher by approximately 1.8 million from the first quarter.…

: Timothy Arcuri – City Group: Hi, a couple of things. First of all can you give us some idea if sort of that $65 million break even is sort of somewhere out there in the future. Can you give us some idea of maybe some sort of near-term milepost? Do you think – where do you think break even will be say in six months and in 12 months?

Well I would expect break even of 6, 5 million to be reachable by Q2 of next year. You should see margin improvements in the fourth quarter steadily moving towards that goal. Timothy Arcuri – City Group: Ok and then just to comment on share loss. Can you explain a bit more why you think you are going to lose so much share? Is it the result of getting rid of the Harmony product, number one or is it more a result of taking a little bit more of protective pricing approach?

Tim, the share loss is a combination of things actually. I’m judging that it will happen because number one our products are late to the upturn if you will. Many of our customers are currently producing in an output driven mode to the upside here with older generation products, Harmony or our competitors. So I think it’s mostly a timing issue in terms of getting the metrics line in position as it makes that transition from wall to production in the market place. Timothy Arcuri – City Group: So just so I can better understand that, so you are saying that the share loss would have happened whether you got rid of Harmony or not?

That’s correct; we have our EOL plan for Harmony that manages ourselves and the customers through this period as we transition them to the more efficient matrix stock line. Timothy Arcuri – City Group: Got it, thanks a lot.

Thank you. Our next question comes from a Gary Hsueh from Oppenheimer. Your question please. Gary Hsueh – Oppenheimer: Yeah hi, thanks for taking my question. Just so I understand organically what you guys are doing in terms of cost, can you itemize what your expectation is in terms of start up cost in Q3, what start up costs were in Q2 and then in line of the MicroProbe litigation, just what sort of the trajectory is in terms of litigation expenses in Q2 – Q3 and Q4? And I’ve got another follow up.

The start up costs associated with Singapore in particular were in the 1 to $2million range. They are not expected to increase materially in Q3 or Q4 and that’s the run rate. So you will see that throughout the rest of the year until Singapore actually starts to ramp and that start up costs comes product costs.

Gary I don’t expect the MicroProbe litigation to be a significant expense in the back half. Gary Hsueh – Oppenheimer: Okay, great and my follow up question just in regards to the 50/30/20 plan you outlined, a couple of things that need to happen besides just sheer OpEx cuts. I assume some of that would walking away from business thereby driving the 8% share loss give or take a few percentage points. Would that be correct, in fact that you guys are going to be more disciplined in walking away from business where you might have been much more aggressive in terms of pricing? And then my second question is, when you sort of get to the $65 million sort of break even mid year next year, do you get to that number more from a bottoms up perspective in terms of how much you think you can cut reasonably and still maintain lead times or is that coming more from a top-down perspective? Because from a top-down perspective if you lose 10% market share points it doesn’t infer a lot of profitability even at the peak of the cycle. :

On the price actions, you are right. Absolutely we’ll lose business via that action. However I would expect it to be margin positive. I’d be surprised if it was revenue neutral. I imagine it might be slightly negative on revenue but we do track as it occurs and we do know what the delta margin is and we are confident it will be margin positive so a contribution to our margin percentage and our margin dollars. But going forward the basis behind the margin plan really has 3 elements and the one you are attacking is the – what I call overhead options for a lack of a better word revenue is required to get your overhead absorption down and that will change if we were to be above 65 million, not below 65 million. But the two more important things are mixed changes where we’re beginning out of a much less profitable product line in Harmony and the much more profitable product in Sequoia I think in that matrix – sorry internal word. It’s easy to put together cost reduction programs that are based on engineering achievements but mixed results are things that we can bank on and should drop through gross margin as we complete tour transition. That can be worked in a 5 to 10 margin point by itself and on top of that we do have a lot of cost reduction opportunities, but I don’t hang my hat on those until the vendor has been qual’ed, the material has been qual’ed or the process changes should yield higher yields has actually been implemented and proven to increase quality and not degrade it. Gary Hsueh – Oppenheimer: Thank you.

Thank you. Our next question comes from the line Jim Covello from Goldman Sachs.Your question please.

Hi, this is Kate Kotlarsky on behalf of Jim Covello. Another question for you regarding some of the comments around share loss, obviously part of the issue is that you are currently transitioning to a new architecture. Do you guys have sense one, the product that is now in qualification start to ship how much of this share loss do you think you can recover maybe by the need of next year?

That’s very hard to predict, we will be in a better position with the product line in 2011. I think the way you should look at this is in our business it is kind of a leapfrog in technology business. The Harmony product line for example has been out there for 4 years or more, lots of opportunities for people to compete with it. The new matrix product line is coming out now with a brand new fresh architecture that provides some superior performances on contacting the wafers and the thermal capabilities of causing that to happen more efficiently and producing better test results. So I think you can expect that better products would gain share back over time and 2011 given the industry is continuing in good shape for demand in that period should be a good year for form factor.

Ok and then it sounds like based on your comments share gains are a priority but not the priority and that profitability is what you will be more focused on versus gaining X number of points a share?

That’s correct.

Ok, that’s very helpful and then maybe one last question from me. Historically Form Factor has talked about gaining incremental share on the flash side and you guys seem to be more focused now kind of going back to your comment about going back to the basics and just kind of maintaining the DRAM business which is historically what the company has been great at .Is it fair to assume that you will continue to focus more on the DRAM side in the near term and less so the flash side?

The answer is we will do both going forward. We’ll take care of our core business in DRAM and we’ll expand in to the NAND and NOR business in the flash market place. Our quarter-over-quarter growth in flash was up 144% and we think the addition of the matrix product family to the NAND flash business in particular is going to be a very interesting opportunity and obviously we are coming from a very low position in the business because we are up over 355% year-over-year, but I think it’s a good sign of acceptance of the TouchMatrix product line which is the matrix family that is dedicated to the flash business.

I would add – applying stricter margin requirements to the business we take does not necessarily lead to a conclusion that flash will be harmed any more than DRAM.

Okay, thank you.

Thank you. Our next question comes from the line of C.J Muse from Barclays Capital. Your question please.

Yeah good afternoon, thank you for taking my question, I guess a few questions. The first one your guidance or I guess unofficial guidance in terms of your OpEx you said 5 million lower. I was hoping you could tell us what that would be including stock options expenses. So if I include it, it was about 35 million in the June quarter. What does that look like in the September quarter?

I was talking from a non-GAAP perspective. The stock option expansion wouldn’t change materially quarter to quarter. So if you see in our reconciliation it should be closed. I’d be glad to take that when I talk to you later.

Ok, go on sir.

The 5 million reduction is predominantly the impact of our reduction force. As you know it’s a fairly large number with 66 people I think was the final number and that has dropped through directly into the quarter. There are some one-time items reversing in Q2 that will help and then there’s discretionary expense control that we’ve undertaken in addition to that.

Ok, but we should see that flow through into December and beyond as well?

That is correct.

Ok and then you talked about cash burn in the single digit, I wasn’t sure whether you meant that as a percentage of your overall mid tax position or what. So if you could clarify that would be great.

I meant as in single digit of millions of dollars. So 0 to 949 million dollars.

So I guess in terms of CapEx and D&A, what’s your outlook for September?

The total year on CapEx is about 40 million. We have historically been pretty weak at forecasting that, it tends to push out our snow plow as we say in the business. So 40 million but I wouldn’t be surprised if it comes in under that number as well as the other element you were asking about.

:

: So like we said before the 65 million is a pretty good benchmark for when we can start to achieve the model by achieving break even and then you can use that 60% drop through rate to sort of dial in whatever numbers flow through any incremental revenue from there. So that is easily remodeled and I’ll let you predict the revenue along with me.

So I guess within that what – is that a net margin of 60%?

The gross – I’m sorry, what? .

The gross margin drop through

60% all the way through to pre-tax. C.J Muse - Barclays Capital : That’s the pre-tax okay and then what kind of tax rate [indiscernible]

To be clear it’s a revenue drop-through so the delta revenue above 65 times 60% will yield your drop through all the way through the P&L.

No I understand, but you are saying it is for the pre tax level, so then what the tax we should assume off of that?

We have a fairly large net operating loss for the foreseeable future.

Ok, so there is a de minimis sort of 200 K a quarter is the right way to think about it?

That would be a good way to look at it, I got to double check if that’s the exact number but it’s in the right range.

Ok and then final question for me, on the break even of 65 million non–GAAP, what kind of stock expenses are you excluding from there? What’s the assumption there?

These are historical options granted at a fairly high strike prices. So you can plan on our historic charges to be a pretty good reflection of our charges going forward. When we complete plan I’d be glad to update you exact stock base compensation numbers for 2011. But I would point out that these are FAS 123 calculations and do not reflect the actual dilution or cost of the stock program.

I understand, but we are not including in the outstanding stock, so for most companies we do back that out so, you know I want to be out as well. Thank you

Thank you

Thank you. Our next question comes from the line of Patrick Ho from Stifel Nicolaus, your question please. Patrick Ho – Stifel Nicolaus: Thanks a lot. First, in terms of the qualification times for matrix, can you just give us a little bit how long it takes and when you can expect some of the customers that are in this transition, when they will be qualified on matrix?

As the qualifyings are very -- not only by customer, by within the customers’ factory plants and [indiscernible] plants as well. As you probably know, our products are custom designed for generally each integrated socket design that the customer moved into production. So, the initial quals cycle is pretty much complete right now for almost all the customers. And this can take nearly anywhere from -- where we’ve been shipping early early qual samples for example as early as late Q3 of 2009 and in Q4, so that work is started to be pretty much behind us, and then it’s a matter of working in to the production volumes, after designs that go to volume. Patrick Ho – Stifel Nicolaus: Great, that’s helpful. With a lot of you, your customers’ typically they try to qualify things ahead of their production lines ramps, particular at the new technology note. Is there any concern on your parts if they are ramping up their respective leading edge technology, whether it’s DRAM or Flash that you’ll mix this cycle with matrix and you will have to wait for the next one? What, I guess, is your feeling on that?

We are not behind on any node transitions, to my knowledge. It’s more of a device designed transition that Gevity now. Patrick Ho – Stifel Nicolaus: Okay, great. Final question for me, that $65milion breakeven, does it account for any additional measure you guys currently have planned that you haven’t announced yet publicly but -- does that account for any other facility closures or anything major on a going forward basis or is it everything that we know up to date?

Actually I would think -- to date, a lot of things that had not been announced, but by now means all the times we have in action. So it’s a conservative number, it is not a high confidence cost reduction program not making on it. So it’s a more solid part of cost reduction than margin improvement Patrick Ho – Stifel Nicolaus: Right, thank you very much.

Thank you. Our final question comes from the line of Kevin Vassily from Pacific Crest Securities. Your question please. Kevin Vassily – Pacific Crest Securities: Hi, thank you for taking my questions. I’ve got several; first, with regard to the point back on the Korea facility, what should we be reading into that, given that at least the prior management team had done a lot to position clear as probably the best market share opportunity that this company had over the next six to eight quarters. Had something materially changed with the customer opportunity there?

No, Kevin there’s nothing changed on the customer opportunity there, with same sort of Hynix obviously. In fact the customer feedback on our action in Korea was they really didn’t care and thought it was the right thing for us to do. What it does is that it lets us really focus on Livermore and Singapore and Japan to drive our output to the new matrix product family as we ramp this in the market. And having stable and predictable factories with achievable missions in a less complex structure lets us meet the customer requirements easier and more efficiently. So this is a big win for the customers and it’s a big win for FormFactor. As I mentioned in my commentary, it also -- I was concerned when I kind of looked at the numbers, that we might be overbuilding our capacity versus what the demand that is coming in the future. So there’s a benefit there as well. Kevin Vassily – Pacific Crest Securities: I guess, second question on the market share issue that obviously they addressed several previous questions, but help me understand why if the qualification through the matrix family is largely in the rearview mirror at this point, why there are market share losses associated with this transition? It would seem to be that customers would be in the uptake mode of the product if it’s been largely qualified or almost finished. Help me kind of get my arms around that.

We are in the process of qualifying many of those customers and particularly large customers, so largely in the rearview, it’s probably not the mix in characterizing. Kevin Vassily – Pacific Crest Securities: Okay, so maybe you can help us on kind of where on the timeline you are, do you have several more quarters with qualification going on with major customers? Or -- particularly in light of the fact that what has been out since Q3 last year?

There are a lot of versions of the Matrix platform. The announced version should be complete in the Q3.

I think, Kevin, what you should think about here is it’s a matter of timing of getting those quals, completed on designs and add customers and the designs that are going in to high volume, alright? All those things have to line up, so calling a timing on that is a very difficult process. I will say our design activity, which is the front end of -- production process where the customers submit their data and we actually do the [indiscernible] design the lay ups, we are operating in full capacity there and are very busy with new designs on the Matrix family, both for DRAM and for Flash. Kevin Vassily – Pacific Crest Securities: When you think about that kind of share a lot, and there’s really only one other company that comes to mind -- demonstrated any capability of consistent supply, who are leading at the designs and -- based on their own challenges, who do you think you are going to be losing market share to in this transition period?

Well, that hard to call. We get some competitive feedback and I’d prefer not to focus on our competitors at this point. Kevin Vassily – Pacific Crest Securities: Part of the reason that I asked that is it kind of surveying you customer’s, what are their bigger concerns was that the downturn did significant damage to the competitive landscape. In some way, they are increasing their reliance on you so if you’re seeing shares [indiscernible] somewhere -- I’m just curious kind of -- you look at the competitive landscape, how is this shaking out?

Well, I think if we get our, pardon the expression, act together, that FormFactor will be in great position with these new products and our customers will benefit from it, that’s the plan. Kevin Vassily – Pacific Crest Securities: Okay -- just involve you in a couple more questions if you will. Can you talked about the margin difference at similar volume levels between matrix are Harmony?

They are significant, regardless of volume, there’s a difference in the bill of materials that its material, not quite intended. Kevin Vassily – Pacific Crest Securities: Okay

By the way, some of that is driven by, just exactly what is included on the programme for example, I mentioned we are seeing to get acceptance for our ATRE capabilities, okay, so once again that’s, if you will, a customization of our product line here and there are many different versions inside customers who love the product line and how they use it by design.

But do not amplify what I said. Matrix is a superior product for us, hence our profitability at unit one or unit 200. Kevin Vassily – Pacific Crest Securities: Okay, and then just one last casual question, the single digit number was in reference to Q3 and beyond cash burn, is that correct?

No, that was a Q4 target. Kevin Vassily – Pacific Crest Securities: Okay, Q4 target, okay, and then the Q2 number was what?

35 million Kevin Vassily – Pacific Crest Securities: Okay, and roughly similar in Q3?

Yeah, we saw some improvement but there’s some overhangs on payables that will make Q3 difficult to improve market [indiscernible] Kevin Vassily – Pacific Crest Securities: Okay, alright, thank you very much.

Thank you. We would now like to conclude the call for today. Thank you again for joining us today. We look forward to speaking with you soon.

Thank you.