Good morning and welcome to today's conference call. Copies of the Lattice Semiconductor Second Quarter ending June 30, 2006, Earnings Press Release may be obtained from the company's website which is www.lscc.com. This call is being recorded and broadcast live over the internet by CCBN. A live broadcast and replay of the call will be available on the Lattice investor relations website, www.lscc.com. At this time, I would like to turn the call over to the Chief Financial Officer, Jan Johannessen. Mr. Johannessen, Please go ahead sir.

Thank you and good afternoon everyone. Joining me on the call today is Steve Skaggs, our President and Chief Executive Officer. Before we begin, I would like the read a Safe Harbor statement and then give a financial review of the second quarter. Then Steve will provide a business review followed by our third quarter outlook. We will then hold a question-and-answer session. I will now read the Safe Harbor statement. This conference call may contain forward-looking statements within the meaning of the federal securities laws including statements about future quarterly financial results, revenues, gross margins, customers, product offerings and the company's ability to compete. Estimates of future revenue are inherently uncertain due to the high percentage of quarterly “turns” business. In addition, the revenues affected by such factors as pricing pressures, competitive actions, the demand for our products and the ability to supply products to customers in a timely manner. The potential impact of defining activity on future revenue is inherently uncertain, because it is unknown whether or when any particular defining may ultimately result in sales for the significant volume. Actual gross margin percentage and operating expenses could vary from estimates due to changes in revenue levels, products price, and mix wafer assembly and test costs, manufacturing yields, stock based compensation charges and other factors. In addition to the forgoing actual results may differ materially from our forward looking statements due to the SEC’s informal enquiry and any resulting actions, the company’s dependencies on its silicon wafer suppliers, technological and product development risk, and other risks that are describe in our filings with the securities and exchange commission. The company does not intend to update or revise any forward looking statements whether as a result of events or circumstances after the date hereof or to reflect the occurrence…

Thanks Jan. in last quarter we post a sequential revenue growth for the sixth consecutive quarter and also posted accelerating sequential revenue growth when compared to the first quarter 2006. These strong results were mainly due to new product revenue growth, although we did also benefit from favorable market conditions across most geographies and markets. Initially as Jan mentioned we reported a profit for the first time since 2001 and also a positive operating income after the exclusion of non cash charges. I personally am very pleases with these results and would like to compliment each and every Lattice employee for a job well done. Geographically, during the quarter Asia made up 45% of our revenue, the Americas 30%, and Europe 25%. Asia grew 16% 80% of revenue last quarter while the direct channel accounted for 58%. Distribution revenue grew 14% sequentially driven by strong resale particularly in North America. During the second quarter FPGA product revenue was $13.1 million or 21% of total revenue and also grew 21% sequentially and 33% on a year-over-year basis. As anticipated, we achieved record quarterly FPGA revenue and reported the highest level of sequential growth in our short history as a FPGA supplier. We clearly gained market share during the quarter and this performance was due to the growth of our new FPGA products. PLD product revenue accounted for $49.6 million or 79% of revenue -- first volume shipments of our newest PLD product line, the 130nm embedded flash MachXO family, which more than doubled its revenue on a sequential basis. Going forward, we expect continued growth from all these new PLD product family. On an overall basis we posted another strong quarter of revenue growth from our new products as historic customer designs continued to move in to volume production. During the…

[Operator Instructions]. And now let’s go to Shawn Webster with JP Morgan.

Hi, this is Shawn for Chris Danely. Good quarter guys, congratulations on the profit improvement.

Thank you.

Can you give us a little bit more color on your backlog, where you saw the best improvement sequentially? Can you talk about also what your book to bill ratio is and what the turns required are?

Sure we specifically don’t give at quantitative breakout of our backlog, but I will say that the backlog grew nicely in double digit rates in turns of sequentially growth. The book to bill was above one. With regard to turn -– let me just share some data that we typically discuss with the turn and then I have some new data for the investment community. Historically, we have given turns data for the direct channel only and as many of you know the direct channel accounts for slightly more than half of our overall business. For the direct channel turns last quarter were about 40%. Recently we have been able to gain agreements from our major distributors to provide us data on their quarter beginning and customer backlog and that data allows us to calculate distributor turns on an equivalent basis to the direct turns number as well as being able to calculate an overall turns number, and therefore going forward and in forum we plan only to provide the overall turns number as we believe that number is more useful than the direct turns number in evaluating our business. So let me now give you the overall turns number to the last two quarters. For Q1 overall turns were 56% and for Q2 overall turns were 50%, now to achieve the mid part of the guidance that we just gave the overall turns number needs to be approximately 45% for Q3, so hopefully that answers all your questions.

That’s very helpful, thanks.

Sure.

Next we’ll hear from David Duley with Merriman Curhan Ford. David Duley - Merriman Curhan Ford & Co: Yeah congratulation on a last quarter and return to profitability. A couple of things here on the new FPGA families, can you give us any more statistics about the new families, either winds, cumulative totals either this quarter or in total and maybe give us an idea what those two new product families did sequentially?

Sure, you know I can touch on that. New FPGA designs continue to grow nicely and establish a new record last quarter, those designs grew about a 35% rate on a sequential basis and I believe on a year-over-year basis actually improved about five fold. We don’t plan to continue to disclose a specific number as I alluded to last quarter in the call because at this stage we believe you know revenue trends and specifically new product revenue trends are a more useful indicator of a success of those new products. Revenue from our newest products namely ECP, XP and Excel grew at about 60% sequential rate last quarter and almost 10 times when measured on a year-over-year basis. Additionally, the ECP product family which is -- you know Dave, was the first family to be introduced, that family broke the $1 million quarterly revenue barrier for the first time last quarter and I would also say you know collectively those new products accounted for about 20% of our total sequential revenue growth last quarter. So you know that will hopefully provide you with some more granularity on the revenue performance of those products, and going forward we expect those products to continue to generate strong revenue growth and contribution to the top line growth. David Duley - Merriman Curhan Ford & Co.: I’ll ask one follow on and then turn over to somebody else. In the new FPAG family you know you are obviously growing those families at very, very rapid rates and your overall growth rate is sequentially 21% it might be the second quarter in the row your FPGA family have outgrown competition. Could you help us understand which products or features in these two families you are seeing the most success, what is the key differentiator here?

Well, the XP family is obviously a very that offers you know a non volatile FPGA that offers some important advantages to the customer based that aren’t available in basically the mainstream volatile FPGAs. Those are advantages of all being design security, instant on functionality, and a more robust field upgradeable solution as well as the ability to implement an FPGA without extra componentry that can provide more space and cost savings, so really dependant on the customer and the application you know, many of those advantages can be important but all are differentiators. So that product you know really provides some substantial differentiation across those dimensions that I’ve discussed. With regard to the ECP family, really you know our strategy there has been to provide more bang for the buck. Our competitors have low cost solutions, they also have -- they basically have a Q brand strategy, we don’t offer kind of a high performance mainstream FPGA, we do offer one at the very high end with embedded SERTES, but we’re not offering kind of a mainstream you know high end FPGA. We prefer to use the low cost architecture to pack in as many features and performance in that architecture. So we are able to provide slightly better performance, better GSP functionality, and you know additional features that typically aren’t available in the low-cost fabric, and that’s what we have done with the ECP1, we have really furthered that emphases strongly with the ECP2 on 90nm and that’s you know essentially the product differentiation. I will also say that you know our market is not really a monolithic market, there are you know many, many customers across the world. So there are ample opportunities to exploit you know differences in the pricing tactics of our competitors and difference in the supports and relationships with customers. So really we are utilizing the ECP architecture to exploit those opportunities in the marketplace and we believe at this point particularly with our 90nm ECP2 architecture we have you know a compelling solution that can be meaningful to a broad part of the customer base. David Duley - Merriman Curhan Ford & Co: Thanks, I’ll come back.

Our next question comes from Bill Dezellem with Tieton Capital Management. Bill, your line is open you may want to check your mute function. Hearing no response, move on to Aalok Shah with D.A. Davidson.

Hi, good quarter. A couple of quick questions for you on the inventory front you know, one of your competitors last time mentioned there could be a build of inventory base especially with the CPLD products in the industrial end market. Are guys seeing any kind of an inventory growth and maybe at the end market and is that maybe reflected I guess in your flat to 4% guidance, and the second question is when we look at -- is there any consideration to maybe pay off that debt or maybe buy back some stock at this point?

I’ll take your first question first. What I’ve seen any -- you know inventory build to speak of really the way we keep track of that is by trying to keep our lead time in a reasonable level. If you look at our PLD business at this point it’s still primarily made up of kind of mainstream products those that enjoy good growth last quarter but the lead time on our main stream PLDs currently fitted above the four to six week area depending on product and package type, but that’s essentially where it was last quarter, so there’s really been no appreciable movement in our lead times and we believe those lead times are manageable by most of the customer base to achieve their business plans. We are getting I would say historically a larger number of expedite requests and for the most part our operation scheme and our suppliers are able to really satisfy the vast majority of those requests and that’s been something that’s been ongoing during the entire year so far. Further if you look at our PLD business you have seen the growth actually been relatively linear and smooth which I know is in sharp contrast to the experience of our larger competitors in the PLD space, so they have some more unique circumstances going on in their business, but I don’t believe we are experiencing. We don’t have any unusual concerns to report about inventory builds or inventory correction within the PLD business. The guidance for the Q3 really relates to the fact that summer in a typical year tends to be seasonally soft because of vacations in Europe and they slow down in retail and that’s the geography and that’s what we try to build in through our guidance at this time. With regards to your second question, we have opportunistically repurchased convertible debts when we feel that it was in our best interests and we will consider viewing that as a financial alternative which we believe is more preferable to repurchasing our stock given our current capital structure and the price of convertible bond.

Steve a quick follow up, in terms of your first answer, if I were to -- kind of handicap in terms of what risks that you may see potentially down the road, and we have seen a lot of semiconductors companies report some higher inventory levels this quarter, is that a concern to the all and that there is maybe some inventory maybe further up the chain that maybe you’re looking at right now?

Well, it’s always a concern; I gave you the reason why I didn’t think it’s a large risk. Really the inventory that’s we built on our own balance sheet relates to our newest products. We believe that it’s very important to have ample inventory to support the production ramp of our customers who choose to adopt those new products we don’t really want to disappoint those customers. We are confident that those new products will have a successful revenue ramp and we would like to be on the support the end products, the ramps of our own customers who adopt those newest products. So, we have actually made an investment in building some inventory on our own balance sheet to support that and I gave you the lead times of our mainstream products, the lead times of our new products are really down at the two to three week level because we want to make absolutely sure that we are able to ship all the demands that we might have whether its forecasted or not for those newest products.

Okay, great thank you.

Sure.

[Operator Instructions]. Next we’ll hear from Lawrence Borgman with Jesup & Lamont. Lawrence Borgman - Jesup & Lamont: Congratulations on the success of your new products. I like to ask something about the communication business, you mentioned that was I think your fastest growing segment versus your largest segment, what if you could kind of break that down by the pieces, which areas are doing fast?

Surely, last quarter communication experienced strong growth once again with double digit sequential growth and as was in the first quarter again that’s frankly generally broad based, growth was really lead by the growth of wire line, wireless segments actually the wire line segment was slightly stronger and that strength came from both domestic and our European supplier. We also saw good growth from the satellite and set top box segment last quarter so as was the case in the first of the quarter of the year we had a very broad based strength in communication market across most applications and most OEMs with particular strength in the segments that I pointed out. Lawrence Borgman - Jesup & Lamont: Okay just one other question, with regard to the new products the products that are non-volatile. Are you finding that’s a big factor in people’s decision to use the product at this point?

Yeah it is because by definition the products are more expensive than then the SRAM products so everybody who has adopted those products have chosen to pay -- you know some form of a price premium. So really that’s not because they like us or you know the products is any different because it does the same function, its because they value the non-volatile approach and the technology and what they can do for their application. Lawrence Borgman - Jesup & Lamont: Is there any particular class of applications where that’s particular valuable?

Well, if you look at the design -- the end market really cut across the normal spectrum of that FPGA design so I would say no, but there are certain classes of applications that value non volatility more, those would tend to be the high reliability applications and they would also tend to be applications that value security and applications that require field upgrades because we believe we have a better and more robust field upgrade solution within our multi-product. Lawrence Borgman - Jesup & Lamont: Thank you.

Our next question come from Kevin (inaudible).

Okay thanks, can you hear me?

Yeah.

(Inaudible).

We can upgrade that in the field for you.

That’d be awesome –- it will be better. I’m going to just want to pick a little bit more on some color on the split of the business if and -– first of all, does the FPGA business -- starting to become fairly material at this point. Is the split that you gave for the overall business kind of the same way the FPGA market segment split is going or is it skewed more towards communication, could you put a color on that?

It’s not materially different from the overall business.

So -– I mean does it suggest that predominantly we are getting -– I mean is a lot of traction coming into -- using PLDs or have you seen some green field opportunities that are ramping as well.

Well we believe that our experiences suggest that most consumers of FPGA’s also have some business and that’s the case with our experience, that’s kind of different whether somebody who designs in one of our new products is a lot of customer now because they could be using our competitors PLDs. So we find that as a new FPGA products -- actually about half or actually a little bit more than half of the designs that our customers historically -- you know haven’t been in a lot of account so really those new FPGA products are allowing us to extend our customer base, but we find that those customers that we enter into with the FPGA products also had some PLD opportunity as well.

Okay, thanks and also if you could maybe give a little bit -- on the last question but a little bit better color in terms of I mean can you describe an application or a geography that you are excited about? I mean is there a specific place where you are seeing this going on -- I know its not driven just by pricing, its also functionality in the technology that you guys are delivering but I mean probably --?

The FPGA business historically is not one that is overtly dependant on single applications, right and so you know we’ve architectural products and then tends to be a successful cross multiple market segments and multiple geography. On the margin Asia is obviously an area that’s historically grown well for us in our competition and we are excited about the indigenous demand in Asia and tends to be a very dynamic market and one that where there is a lot of new design activity and that’s the market where we focus on we believe we are being successful. In the rest of the world, the communication market is still over 50% of the market opportunity and that’s an area where we are very focused on and where our SC products which is not contributing revenue today but is targeted clearly towards that market so we do have particular focus on the communication market. Additionally beyond that there is a substantial amount of diversification going on in our industry as FPGA and FPLE technology gets adopted in new segments where historically there is been no penetration, those are primarily the consumer market and the automotive market as well as in some industrial applications but that really there is no particularly single application that I would point out within those markets but all those are the focus for us you know as well as competition.

So, broad base is the order I guess?

I think so, I mean that’s the nature of our business and we are definitely not architecting products for specific applications, our products are targeted towards broad applications with the singular exception of the SC which has go some unique functionality designed to be very attractive for the communications market which is the biggest market.

And without naming specific customers I know that if you look into Japan your, obviously your Fab partner is one of the largest consumers or one of the large consumers of FPGA, PLD products, is there a headway and in more than a manufacturing relationship with your Fab partner?

The attention of the two companies to develop a sales partnership is well and we have engaged our Fab partner in Japan so just to actually distribute our products in the Japanese market for other small number of accounts at present but the mutual intention is to grow the market demands for FPGA products that are manufactured by Fujitsu. Using the Fujitsu sales presence both within Japan and within Fujitsu itself. So that’s a very long-term strategic objective proposed companies. It’s a win-win objective obviously and its one at will be working diligently towards over the long run.

Okay, I appreciate that just one more quick one. The substrate issue that was impacting couple of your competitors in previous quarters, I think that’s worked its way through.

No, substrate times are still unacceptably long and really has a constraint effect on kind of higher end products where we feel that is in kind of the release schedule with some of our newer products with chip technology I guess (inaudible) we don’t have for the basic business that uses very advanced packages that contribute a lot of revenue today but we are you know working very vigorously to release these types of products in a timely fashion. I haven’t seen a substantial change in substrate availability and lead time.

Has that been part of the reason why there has been some expedited orders in there in order to meet and --

No, because today it’s the base of our business really is more lower-end, lower ASP products, PLD products, and lower end FPAGs that don’t use these very advanced packages. So I really can’t obviously comment on my competitor’s business situation but I can say that with regard to lead times for very advanced substrates, high (inaudible) substrates for high end FPGAs, the lead times are still unacceptably long and there is some constraint in getting those and that really impacts you know my new product release schedule which you know we are actually trying to work, so it doesn’t impact our revenue because we have drive a lot of revenue from those type of packaging today.

Is that why we haven’t heard a whole lot about the DDR2 interface recently, or is you’re just not interested --?

That’s not related to this issue.

Okay, great thanks a lot –

Sure.

Keep up the good work, we appreciate it thanks.

Yeah.

We’ll take our next question from Mark Edelstone with Morgan Stanley

Hi guys good job, this is actually Sanjay Devgan on behalf of Mark Edelstone. I just had a quick question regarding demand environment I notice you talked about the double digit sequential growth in your backlog and I was just wondering had you seen any instances of double ordering or you know what kind of checks do you put in place to kind of ensure that double don’t take place, please comment on that?

We – the best thing that we can do to ensure that double (inaudible) doesn’t take place to keep our lead times at acceptable levels and to respond to the --you know expedite requests that end customers have to make their bill scheduled and I think I gave you some data and perspective on that and we believe we are doing a reasonable job we can always be of course do better, but doing a reasonable job responding to that and not you know leaving up a lot of business on the table. So that’s basically I think that’s the best way to reinforce that, we actually work with those customers and those should be your partners who have you know high level of business with us and rapidly demand to ensure that we respond to them including daily forecast and working on a day-to-day, week-to-week basis to respond to upsides of this forecast and so forth. It was really you know a double ordering is you know I think a knee jerk way to try to respond to basically which is a need to get more part. So we have groups in place and processes in place to service you know our major customers and to respond to their upside request and I mentioned I believe for the most part obviously there is you know exceptions to everything, that’s with the vast majority of cases we are able to respond to that last quarter and we will be able to respond when we likely to expect this quarter. So that’s you know how I would answer your question. With regard to the you know the backlog being up that’s obviously you know it’s better than the opposite condition and you know we are attending to each quarter to book out some more in the next quarter and our turns have come down slightly as I gave you in the data, so that helps us schedule our business better and to manage on the business in a more corrective fashion.

Great, thank you very much.

Sure.

[Operator Instructions]. We have David Duley with Merriman Curhan. David Duley - Merriman Curhan Ford & Co: Yeah, just a couple of follow ons here, with the introduction of the lot of the new FPGA products what kind of improvement are you seeing in your across the board ASP and are you -- is that kind of something that helping your top line on profitability or just something we should be focusing on?

Well, that’s you can decide whether you should focus in or not, I would say the ASP went up last quarter and we’d expect the ASP to go up, with respect to the kind of the overall business margins, our margin targets for the FPGA business is really same as the PLD business is not different there. So, we have a relatively lower speed today because we are dependant on PLD products. FPGA products have a higher ASP introduction of competitive FPGA products will allow us to raise the ASP if we do our job and I think eventually all that we said there we can achieve faster growth on lower units if we are successful. David Duley - Merriman Curhan Ford & Co: Okay and you know mentioned I think when I asked you before that the new FPGA design wins this quarter I think we are up 35% sequentially to record levels, I think to remember a total penal design number of about 1500 for both these families something around there and a very steep curve of adoption of designs. I was just wondering if you might be able to have -- give us your best guess or you know talk about do you think you can continue to grow your FPGA revenues in line with the market or expect to be growing faster lets say than whatever the 18% growth rate of this market, whatever?

Yeah, our goal is clearly to grow faster than market, in order to do that you know we need to have a competitive products line. We need to grow our designs and have this design strengths laid into volume production orders. That’s the kind of recipe we have trying to follow from the last four to five quarters and we will continue to follow that. Designs were up the amount I gave you, cumulative designs are actually a lot higher than the figure you have and really our focus really is on achieving the revenue ramp required to reach the result to that you articulated. David Duley - Merriman Curhan Ford & Co: So, lets just fit it out with a little bit with several thousand designs between the two families and your new product revenue this quarter of being up 52%, they only really being about 9 million. We could expect that new product number and the FPGA number to continue to grow by robustly if those designs come into production.

Correct, that’s our current expectation. David Duley - Merriman Curhan Ford & Co: Great, one final thing for me is, you are assuming last turn of this quarter I guess because your backlog figure but sometimes your customers come in for the same amount of turns business so, what is the rationale to assuming a lower level of turns this quarter and obviously we can achieve the same level that would imply that we have a little bit of upside to the revenue, correct?

Well, right that’s how the math works, the rationale for assuming the lower turns is that customers are tending to book out more so that lowers the turns because they book in more. Their anticipated demand which is your first point. There is the second point is that in Europe in summer traditionally it tends to be a down quarter with regard to actual consumption of products. So we tried to factor that into our analysis of our outlook. David Duley - Merriman Curhan Ford & Co: Okay, thank you.

Sure

(Inaudible).

Thank you, and you are able to here me at this time?

We can.

All right, my apologies for the technical difficulties before. A couple of questions, first of all as time progresses and as the FPGA families or just the new products ramp to a higher level volume in production. Is it reasonable to expect that the gross margin should expand under that scenario and what I am talking about any specific quarter, but just in the future?

Well, gross margin is very difficult to predict. We are pricing our new products for penetration, expect with yield and cost prediction to earn corporate margin targets, which are 55% to 60% on those new products over time. So, we are comfortable with the way the margin is today and if, you know we are more success than our plan with regard to yield enhancements and cost reductions you know, there is opportunity for the margin to improve. There is also an opportunity for the margin to improve with scale because a certain proportion of our cost is goods sold, obviously with a higher revenue base we get better amortization of our fixed cost and the margin improves. Now there -- actually if we ramp the new products faster than planned we can have the pressing effect on the margin because of the mix issues. So I would answer your question with yes, its possible that as the business and revenue grows for the margin to expand, but its also possible that it doesn’t for the reasons I described, but we’re comfortable with where the margin and if we exceed our internal plans and grow our revenue the margins -- you know could well expand slightly.

And that is helpful and then relative to the sequential FPGA growth that you saw in revenue this quarter, which of the ECXT and SC family were really the primary driver or drivers behind that growth?

Well, its not the SC families, because the 98nm family is really have no material revenue contribution at this point, its just too early to expect that to happen so for the next calendar year. But if you take a look at the FPGA business both the new and the mainstream FPGA has experienced some growth last quarter contributes to that growth, so really the ECP the XP families such are newest families had a healthy growth as did our FPSC and first generation XP families were still in their revenue generation --..

And did either of the EC or XP family get stand out relative to the other?

Well, I looked to the sequential growth of actually all those families I just talked about and are very healthy in high double digits rates.

That’s helpful, thank you.

Sure. operator: And next we’ll hear Peter Schleider with Peninsula Capital.

First congrats on a great quarter. I am curious about the design tool kind of evolution for the FPGA family and where you are there both with -- I believe you use some internal tools, but also with external tools as well and then I have a follow up.

We continually improve our tools by both adding functionality, improving the usability and improving the performance and utilization of the tool as it relates to implementing designs on our silicon. At this point today we rely solely on outside third parties to provide syntheses and our partners are Simplicity and Mentor Graphics so they provide the syntheses engine and capability for all our architectures and to provide ongoing upgrades so they are synthesis support for our product lines and regular release of our products. So --

Where do they stand on supporting the various families?

They both support all our production families and both provide support for our new families and also for families that are currently in the development phase, we would need to have software tools to do silicon development, to router our own designs and so forth. So both Simplicity and Mentor provide us a support for our full product line and you know we’re -- both are good partners and both provide ongoing roadmaps and improvements to support for our full product lines.

All right. So you are up to date with those products?

We are.

Okay, great. And then on the IP side what is going on there in terms of either course that you might provide or third parties?

Right, for IP we have an internal IP effort and then we have third party partners to provide the IP course. We’ve actually substantially extended our third party our program dealing with the launch of our 90-nanometer products I gave some statistics upfront. Today we have ample availability of that course for ECP2 and SP and 90-nanometer products both from internal developments and from third party providers. We try not to compete with our third party providers and allow them to focus in the areas if they are an expertise to provide email course. Essentially our IP course strategy is kind of an AD20 approach. We want to provide the bulk of the course and what we believe will be do you have the bulk of market opportunity. So if you look at where we are today with IP core support for our many new products we’re far and away ahead of where we were at a comparable time for 130nm products simply through experience and being in the markets longer.

All right. And then jumping to this third question, my recollection was that after Q4 you had that same 45% number for Q1, is that right?

You may have kind of missed the explanation I gave but we’re changing the way we calculate and provide turns. Prior to this quarter we were providing turns just for the direct channel which is slightly over half our business because that was really only data we have. To provide a turns calculation one needs to have the quarter beginning of backlog. In the distribution channel since we report revenue on resale, one really needs the end customer backlog on the distributor partner and we haven’t really had sufficient data calculate turns through the distribution channel prior to this quarter. So I gave some numbers so you could have a historical perspective for the turns numbers for the distribution channel. I don’t have the number for Q4 for the overall basis because I don’t have that data from the distributor.

Yeah I was thinking more when you give out the Q4 for the guidance going for Q1 and my recollection was just 45% and -- well that’s it, I appreciate it, thanks.

Okay.

And we’ll take a question from Bryan (inaudible).

Hi, guys, thanks for taking my and congratulations on the quarter. just a question about your operating leverage, could you talk a little bit about how we should be thinking about your operating expenses growing as your revenues grow, you had some nice leverages this quarter as we think about it going forward and may be as differently is there kind of a revenue run rate that we should be talking about for this given opex level, thanks.

We definitely do operating leverage in the business model going forward and obviously our expectations are that if the revenue growth, operating expenses should grow slower than revenue. I have said in the past that 2006 is really shaping up to be a transition year for business model. Given the magnitude and dynamic nature of the FPGA module we believe its prudent to continue a very heavy investment in R&D to push forward with new product initiatives and to may become relevant in that market space. But we have over the past year or so treated R&D as more or less a fixed expense. So should market conditions continue to be favorable, we believe we can migrate to kind of this following long-term business model gross margin 55% to 60%. R&D 25% to 30% and SG&A 17% to 20% with an operating profit of 10% to 15% and really the pace at which we approach this model, we are driven mostly by how successful we are in growing our top line revenue which is kind of mostly dependent on our real market conditions and how successful we are and penetrating the market with our new FPGA products. So, assuming that you treat R&D as a fixed expense you can take those percentages and calculate the answer of your question as the revenue level that you would expect to be at with a current IP expenditures.

Great thanks a lot.

Sure.

And at this time I have no further questions coming in. Mr. Skaggs, I will hand the conference back to you for any closing comments you might have.

Great, thanks everybody for your time, as always feel free to follow up with any more specific questions directly to the company. Thanks, and talk to you later.

This concludes today conference call, you may now disconnect.