Good evening. My name is Ali and I will be your conference operator today. At this time, I would like to welcome everyone to the Lattice Semiconductor Third Quarter 2011 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. I would now like to turn the conference over to your host Mr. David Pasquale of Global IR Partners. Mr. Pasquale, you may begin your call.

Thank you, Ali. Welcome, everyone to Lattice Semiconductor’s third quarter 2011 results conference call. Joining us today from the company are Mr. Darin G. Billerbeck, the company’s President and CEO, and Mr. Joe Bedewi, Lattice’s Chief Financial Officer. Both executives will be available for Q&A after the prepared comments. If you have not yet received a copy of today’s results release, please e-mail Global IR Partners using lscc@globalirpartners.com or you can get a copy of the release off of the Investor Relations section at Lattice Semiconductor’s website. Before we begin the formal remarks, I’ll review the Safe Harbor Statement. It’s our intention that this call will comply with the requirements of SEC Regulation FD. This call includes and constitutes the company’s official guidance for the fourth quarter of fiscal 2011. If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as a press release or publicly-announced conference call. The matters that we discuss today, other than the historical information, include forward-looking statements relating to our future financial performance and other performance expectations. Investors are cautioned that forward-looking statements are neither promises nor guarantees. They involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission including our fiscal year 2010 Form 10-K filed on March 11 and our Quarterly Reports on Form 10-Q. The Company disclaims any obligation to publicly update or revise any such forward-looking statements to reflect events or circumstances that occur after this call. Our prepared remarks also will be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles or GAAP. I would like to now turn the call over to Mr. Darin Billerbeck. Please go ahead, sir.

Thank you, David, and thanks to everybody for joining us on the call today. Results for the third quarter came in within our updated guidance, but below our original guidance. The revenue shortfall was a result of weaker than normal demand in many of our markets. We remain close to our customers worldwide as we continue to have open discussions throughout the quarter. The goal was and remains to support our customers however possible. The reality is that the prolonged concerns over the worldwide financial crisis and weakness in the telecom infrastructure build out resulted in order push outs. During this period of uncertainty, we continue to streamline our company for long term efficiency. We are tightening spending across all operations, managing our inventory and making further inroads on restructuring goals. In Q3, we established our Philippines operations in R&D office. In addition, we entered into an agreement to outsource our sort testing from the U.S. to an Asian subcontractor. We also outsourced several non-core IT support functions. They are no longer cost effective internally. And finally, we will have completed the closure of our Pennsylvania R&D office by the end of this fiscal quarter. We expect our efforts combined with the acceleration of our new products to market. We will help minimize the impact of any prolonged slowdown. Lattice does remain committed to developing differentiated products that deliver low power, low costs, and affordable innovation. This value proposition resonates well with our customers. As an example, our mid-range Lattice ECP3 continues to perform well with some big design win communication customers. We’re also pleased to report that our low density MachXO2 continues to make progress. Our sales team does harder work to accelerate the number of design wins in markets as diverse of handsets, servers, networks, and wireless. We…

Thanks Darin. As noted earlier, revenue for the third quarter was $81.7 million, a decrease of 2.6% from the prior quarter and up 6% from year ago period. Gross margin for Q3 was within our original guidance at 58.6% compared to 60.4% in the prior quarter and 59.1% in the year ago period. The decline was driven by product mix, gold, and yield related costs. Total operating expenses for the third quarter came in at 35.6 million, this was better than our original guidance of 36. 5 million and compares to 37.8 million in the second quarter. This reduction in operating expenses reflects our active efforts to control cost given the revenue decline we’ve experienced in the quarter. We also incurred approximately 1.8 million restructuring charges in the quarter compared to 1.4 million in Q2, 2011, we expect restructuring charges to decline in Q4 with actions substantially completed by the end of the year. Q3 net income was 13.3 million or $0.11 per diluted share as compared to 13.0 million or $0.11 per diluted share in the second quarter compared to 15.4 million or $0.13 per diluted share in the year ago period, restructuring charges of 1.8 million in Q3 represent $0.01 per diluted share. At the current share price our expected diluted share count – we expect our diluted share count to be approximately 120.6 million shares. The share count reflects the retirement of approximately 851,000 shares valued at approximately 4.8 million purchased under our $20 million share repurchase program. We have purchased approximately – we have repurchased approximately 2.5 million shares valued at approximately 14.8 million under the program today. Moving on to our balance sheet our balance sheet was further strengthened in the quarter. We generate an additional 26.4 million of cash from operations ending the quarter with a cash, cash equivalents and short term marketable securities balance of 267.2 million and we continue to have no debt. Accounts receivable at October were 53.5 million compared to 56.4 million at the end of last quarter and day sales outstanding for 59 days compared to 61 days last quarter and 57 days in Q3, 2010. Inventory at October 1, 2011 was 35.1 million flat to last quarter. Months of inventory now stands at 3.1 months compared to 3.2 months at the end of Q2 2011. We spent approximately 1.4 million on capital expenditures during the third quarter down from 3.2 million in Q2 with quarterly depreciation and amortization expense at 4.1 million compared to 4.4 million in Q2. This concludes the financial review portion of the call. I’ll now turn things back over to Darin for the fourth quarter business outlook. Darin?

Thank you, Joe. In summary, Lattice remains at strong competitive position with solid financials. We continue to focus on lowering our cost structure, accelerating our new products to market, and providing great service to our customers. The innovation and affordability of our products offer our customers great value proposition and give us a differentiated market position. We remain confident in our long-term growth prospects, we will continue to drive further R&D, sales, costs, and operational efficiencies. Let me now turn to our fourth quarter expectations. We expect revenues to decline 4% to 9% as compared to Q3. Q4 gross margins are expected to be approximately 59% plus or minus 2 points. Total operating expenses are expected to be flat at approximately $35.6 million. This includes approximately $1 million in restructuring charges. As Joe noted earlier, we expect restructuring activities to be substantially completed by the end of this year. This concludes our prepared remarks. Operator, we will now be happy to take any questions.

(Operator Instructions) and your first question comes from the line of Ruben Roy.

Thank you. Darin, hi.

Hello Ruben.

In terms of the guidance 4% to 9% down, how would you characterize that in terms of end markets? Is that similar to what you saw in Q3 and continued weakness in telecom being negative outlier or is that changing at all?

That’s probably fair to say. I think the majority of what we see it’s really in the coms infrastructure and that’s driven by a lot of things, government spending, it’s by some of the builds out. It could be some of the mergers that we have seen because they are still conjuncture on AT&T versus the things that they are doing, but all in all I think that’s the big softening and there is a little bit it’s due to seasonality and typically the coms market does have a little bit of seasonality in the fourth quarter for us, so I’d attribute it all to that, but I think the majority is just softness along with seasonality.

Your next question comes from the line of Tristan Gerra.

Hi, good afternoon, how much inventory delivered you think there is at the second half and if so what was the timeframe you think the PLE industry (inaudible) demand?

Are you talking about specifically – by the way, hi Tristan.

Hi.

You are talking about the specific coms market?

No, but just in general, (inaudible) end markets?

Yeah I don’t know that we see a huge inventory buildup out there. I mean the distribution channel is fairly healthy for us. On the coms side of it, it’s hard to tell right, because there is different inventory stages at different places but the softest I think – probably inventory in that channel and whether it takes like last year, it burned up pretty quick because remember everyone thought it would last a few quarters, Q4 was soft, and then it came pretty strong in Q1, so I would argue that there is not an inventory challenge, I think more than any, there is more a demand challenge as we have gone through it because you remember our distribution is sell through, so – and I think – by the way I think that the other element there is one of the reasons our inventory – our own internal inventory didn’t go. We have been managing that closely since the beginning of the year which is why you may see some different inventory challenges with some of our competitors.

Your next question is from Nathan Johnson.

Thanks for taking my question. Just coming back on the overall kind of comparison you guys versus your competitors. I mean if I were to take the September and December quarters together, you guys seem to be outperforming, larger brother. I’m just curious what you would attribute that to whether that’s a customer mix or some sort of share gains that you guys are expecting to see. And then secondly just you guys had mentioned in your prepared comments about some golden yield related costs that have been higher than expected, I’m wondering if those were expected to persist or how long we should expect those to be around? Thanks.

Yes, I think the first – let me answer the first question. I’ll let Joe tackle the golden yield one. From a first perspective, I think remember we are new to the comps market. And when I say new to the comps market with our ECP2, 3, M family even though we ship a lot of XO for (inaudible) and a lot of our lower density products and they are new, so as we began growing that business, we are probably taking some share from the competitors because we haven’t played in that in a big way for a long time and I think that’s why we were less impacted last Q4 when the inventory started turning – when the market started turning down we were a little bit less impacted and we came back faster because most of our designs are new, right. Even though we do service the comps, both wired and wireless with our excel and 4KZE and some of the our PLD products, I think that’s one of the big reasons why as you see us grow there is an impact. I will let Joe answer the gold.

Okay. On the gold side, so our prices and costs tend to fluctuate with gold. We see changes in gold prices flow through fairly quickly to us depending on the inventory at our sub-cons. So depending on the inventory of the sub-cons and whether or not they are building that price could decline into this quarter. We are anticipating some small drop off at the end of the quarter in pricing just based on where gold has been heading and we will see how that goes, I mean we are monitoring that of course. On the yield side we have – we have yield impact that we don’t believe we are going to continue. So one of them was an impact related to a shift in production during the Japanese earthquake that caused us a one-time yield hit, that hit has been taken care of, we moved the production back to original factory and we feel that has flowed through the system right now. Combined yield and gold made up about half of our decline in gross margin. So we see one-time event with the yield and we see potential some uplift in gold towards the end of the quarter.

Right. And then just one quick follow-up on the business model transformation, you guys clearly exiting this year or anticipating to be by and large through that, should we expect the charge of special items to practically become zero after that. And are you expecting operating expenses to fairly flat in the first part of next year?

Yes, operating expenses should be fairly flat going into first part of the year. You’ll see some restructuring charges trickle into Q1. But we are virtually done. We accelerated some of those charges going into Q3, you notice we’re up quarter-on-quarter and up over our guidance. We pull then IT restructuring charges and we did some work in Manila to optimize that site and move operations there quicker. We did that because we saw some weakening going on and we wanted to position ourselves to get those savings sooner.

Great, thank you.

Our next question comes from Sundeep Bajikar.

Hi guys.

Hi Sundeep.

Nice growth in the ECP3 revenues sequentially. Wondering if you can give us more color on that in terms of which end markets you think drove that growth, clearly doesn’t reconcile with what you saw in communications. So really curious what’s happening there?

Yeah, again remember ECP3 penetration into this market isn’t new for us. Even though we’ve been shipping in a while those design wins take a long time, right, because even though you get a design win there is still the certification of the system and the verification all those stuff right. So it can take a year-and-a-half. So part of this is just we’re starting to sell more into that wireless communication market. And that’s a primarily driver for us. And so did that outperform, well, it’s a new product for us. So as it grows it looks like it’s growing very, very quickly and we would expect it to, but it’s still not a major part of the comps.

Okay, that’s helpful. And just a follow-up on that perhaps just give us a sense for the competitive environment you are seeing particularly in 3G base station, which as I understand is the primary market for ECP3 in communications. Are you seeing more competition from 40 nanometer FPGAs from one of your larger competitors or are you seeing more competition from the 65 or 60 nanometer FPGAs from another one of your larger competitors.

Yes, so it really depends on the low-density but kind of spell it out little different is that on the smaller low-density ECP3, the competition would come from a 65 nanometer process technology because it’s difficult because its dyes are fairly small, but on the larger low density you are going to see some of the competition come from 45 right because obviously those are the ones that we would move forward on that technology and those are the price we look for as we look for our technology node. So I think you are going to have a combination so on the high density 150 ECB3 devices you will see comp coming from 45 nanometer on our lower density you would see it coming from 65.

Great and then another question on new products, did you book meaningful revenues from MachXO due this quarter and ECP4 still on track?

So, I think what you meant was MachXO2 right, so MachXO has done well. MachXO2 we’ve got some really good design wins. We’re actually doing very well in the mobile handset kind of the mobile consumer market which is different for us and also take a little bit of time to get in. I wouldn’t expect to have massive revenue on MachXO2 in 2012 but we would position ourselves really for 2013 but let’s not forget we still sell MachXO and 4000ZE into the exact same market, so as we penetrate those markets we have more than one offering there and then your other question was on ECP4 and I will say stay tuned for this quarter.

Okay, great, thank you guys.

Your next question comes from Sanjay Devgan.

Thanks for taking my questions. Just a – first question is kind of a quick follow-up to the question on the Gold. You talked about – as the commodity prices increases – impact you but I was wondering what is the possibility or feasibility of transitioning to an alternative commodity such as Copper and if that is feasible how long does that take to re-qualify with customers?

Yeah, absolutely you want to convert as much of the product line to Copper, Copper is a huge cost production over Gold. We have plans on our high volume roadmap – on all the high volume products on our roadmap to do some Copper conversions. Let’s not forget that in some cases it is easier for us to do than it is many times for our customers to accept because that can be a product or a process change ratification. So, what we try do is balance our commitment to our customers ramp rate with our ability to convert to a very low cost structure so we got all those plans in place we are executing those plans and we expect to have a lot of that stuff done by probably the middle of next year.

Great. And just follow-up also to the MachXO2, you talked about a number of interesting handset opportunities. We’re just wondering if you can talk to some of the silicon that you are displacing, some of the features or functionalities that MachXO2 is bringing to these handsets and how we should kind of look at that opportunity kind of evolving forward?

Yeah, it’s interesting because it is a new market for us and so in some cases it’s simple stuff it can be small little 18-IO devices where they just doing little levels shifters or they doing new sensing where they want a specific hardened IP in there that they may not have put in their (inaudible) so in some cases it could be a small ASIC that we replaced that they just going to have more flexibility in the system, so it would be one PCB and then if they forget to enter, they have IOs to address that. Other cases it is a specific functionality that XO2 have on that we put – could be PCI, could be a lot of different functions we put on those that they like and they found that that’s a better approach for them than integrating that on their agent. So we see a lot of different applications and then there is one I want to tell you about, but there is one that we found is a really pretty good power management focus but it was really interesting and some of these things are customers as your price points get to a certain level, they became more innovated in their own approaches. We know about others, they come to us.

Very helpful, just last question, more of a housekeeping question? As you look at the outlook of down 4% to 9%, I was wondering if you can give us sense of what the turns requirement is to make that how does that compare with kind of historical turns levels?

So, we are moving back to historical turns levels. We’ve had low turns levels in the past couple of quarters basically because of some of the issues in Japan so forth. We are moving back to the more historical levels.

Okay, thank you very much.

Your next question comes from David Duley.

Yes, thanks for taking my question. Just another follow-up question on the gold, how meaningful would it be for Lattice to transition from gold to copper. What sort of cost savings would you generate on the gross margin line or how we’d like to tackle it?

Yes, interesting. Well, so we don’t look at – I don’t look at it on a specific product perspective. I can tell you that you can go look at the $1600 per ounce of gold versus the copper and – I don’t know that we have figured it out on product or gross margin. We’re looking at relative big savings from a corporate perspective. I don’t know if we have that.

Do you know what percentage of cost of goods sold is made up of gold?

All right. It’s a small percent. I don’t have the number right at the top of my head.

Okay. But it is suffice to say there are some meaningful savings to..

There are definitely meaningful savings. It positions us for our long-term cost reduction strategy. Have we modeled into the full-grown P&L? Not yet.

And are you starting to transition now or have you already been transitioning parts to copper?

Yeah, we started the copper conversion actually in January of this year because we had seen – for some of our lower density products and mid density price that offered a pretty nice cost reduction. So we started that conversion early on. As we move through the year we put a pretty big focus on a lot of the things that we’ve focused on being the highest end devices which costs less. But you just take the – when Joe said we got hit by copper, you could almost say that mix flexibility would be removed. Right so later on if you have converted the majority of products to copper, you would never come back into your P&L and say, oops, I had an adjustment in my material set. That’s how I look at it, right.

Okay. Just two follow-ups, you mentioned how the communication sector I think was going to be down in Q4. Could you just talk a little bit about the other sectors and then the final question is do you have plans to extend the buyback particularly given the cash generation in the current quarter. Thanks.

Yeah, so let’s talk about the buyback first. We bring that to the board in every board meeting and they take a look at all the elements that have to do with that so that will be another discussion as we move through the year. And then at the other markets I think that for us what was interesting is that we mentioned, Japan and U.S. were very strong, the strength in those markets had to do with a lot of different broad-base applications, a little bit of the industrial stuff, different things, computing consumer, but I would argue that where we are aiming up as a market we are going to expect that everything to be deflated as the crisis continue. So I don’t, I’m not really predicting any one market being up in the next quarter but I think as we get through those crisis things will recover. I remember last Q4 we were all really worried about Q1 and Q2 because some of the inventory bounced back pretty quick. So I think once they resolve some of the macro events I think things get back on track pretty quick. The whole FPGA market looks as so it’s down, if I look at the overall from our competitors and ourselves. So who knows all we can do is manage our inventory, manage our cost structures, continue to – for the efficiencies and all aspects of our business and then be prepared for that upside with great new products and innovations.

So are you happy with where the inventory levels are now?

Our inventory levels, absolutely. I think we managed our inventory levels down pretty fast and we are comfortable with our inventory levels because remember we have to balance being able to ship to customers incurring very little inventory. And I think we are reaching the threshold now where we feel like we are at the right level. The channel inventory I think with distribution it feels comfortable. You really don’t know what the end customers and comps look at, when people push orders and I think everybody got orders pushed on that means there is inventory in the channel or there is less demand which is related to the same thing.

Right.

I think in the comps there is always argument is it quarter, is it half a year I might got it’s probably shorter rather than longer because lot of the stuffs going to work its way through?

Thanks.

Yep.

Your next question comes from the line of Bill Dezellem.

Thank you. Would you please address the size of the MachXO2 markets that PLDs can now address within the press release you may reference to the fact that were previously not accessible?

Yeah, so I think that if you look at where we are headed with that product and it could go just about every place the market. I think what it offers us because it has an extremely low power to it. It offers us the ability to get into these real low power battery applications that we may not have been able to get into with markets. So now we could have done that with our 4KZE, but the cost structure on the 4KZE longer term will probably be a little bit higher than we drive MachXO2. So we look at it kind of that whole mobile consumer market that we haven’t traditionally played in, it’s a big opportunity. A lot of people will tell you that markets in the billions, right, if you really think about it. I don’t know if it is quite that big because you are taking pretty low densities and low prices, but it’s a big opportunity. Then you look at consumer, you look at the computing with these netbooks and some of the laptop and tablets and even the cell phones that operates very similarly. I think you are going to see some pretty big market opportunities there. So the ASPs are now like comps markets, but the volumes are much higher.

Did we hear correctly that the MachXO2 family, if that product in itself has a market that is multiples, the current revenue size of Lattice?

Multiples – one can argue – I can argue this if I sell a billion units at $0.50, it’s $500 million which is bigger than we are today if you believe the numbers, right. I don’t think you are going to put a MachXO2 in every cell phone on the planet, so you’re probably not going to be (inaudible) but I can argue that we are looking at market potential that are big sizes for our company, right, because we want to grow and we want to grow faster than the market and so I think we are going to look at opportunities to gain share in areas like comms and other opportunities to maybe create new markets that haven’t been played before with FPGAs.

That’s very helpful. Thank you.

Yep.

Your next question is a follow-up from Ruben Roy. Ruben Roy Hey, thanks (inaudible) I didn’t get to this the first time around but in lieu of some of these changes in kind of the customer behavior, are you seeing any changes in design activity?

Actually, we are seeing a little bit, like some of the higher end design seemed to be pushing a little bit, but on that same sense and there is more cost reductions going, right, so maybe that there is sometimes you get inflection points when the economic crisis occurs, where people are really focused on reducing the cost structures of the products they have. In parallel, we are trying to develop a new product. And I think you are going to see a little of that with LTE rollout because you got the LTE rollout that may get slowed down because of funding, but on the other hand you still have to connect to customers, and 2.5 and 3G for emerging markets is still the cheapest way to do it Ruben Roy Okay. And then just a follow-up for Joe on the inventory discussion kind of keeping it flat even with revenues kind of trending down a bit hear are you going to continue I know you said you are kind of comfortable with where inventory is but actually managing that down has there been any changes on the manufacturing side or you planning any changes with the manufacturing partners or anything like that.

Not at this point. Ruben Roy Okay.

I mean, we are still committed to the partners we have. Ruben Roy Okay, all right great, that’s all I had, thanks guys.

Your next question is a follow-up from Tristan Gerra.

Hi again, could you give us some feedback on the outlook specifically in China from the demand standpoint for Q4, how is it, what it is to your guidance and perhaps any initial search in to potential demands from next year.

Yeah, so if look and try to remember we sell into China, we sell our parts in the China and then Chinese customers sell that everywhere, right. So, I think the Chinese from my personal opinion I think China itself is still growing, I think India is still growing, I think you still have Africa growing. I think the Europe and U.S. are not. I think they are slowing because some of the situations that are going on. So, their market potential is probably more impacted which then again affects us. So, our quarter being down has a big impact on what we believe is what’s going on, right because we think if we are going to have less demand in the comps market this market because of those artifacts and macro environment. Right so I hope that was your question right you were asking.

Yes. And if we look at and maybe it’s not easy to differentiate out of your large customer in China, which I’m assuming about half of this is local demand versus international demand. So you mentioned that you are saying to us growth in Q4 also, do you expect any significant change in trend in that regard next year or would you say that...

So your numbers are about the same as ours, right. So it’s about 50% here and 50% there. So I think that’s about aligned with what we’re thinking. Again I don’t think there was huge inventory buildup that we saw before. So we’re hoping and hope is not a strategy but we’re hoping that that thing gets itself back on track after Q4.

Very useful, thank you.

All right, thanks.

Our next question comes from Richard Shannon.

Hi Richard.

Hi guys, how are you?

Richard, good.

Maybe just couple of quick questions kind of looking at your numbers from a couple of different slices. Looking at your product age splits, your Mature products have actually held up pretty well this year, third quarter numbers are pretty good. What’s the driver of that and how do you view that going forward?

Okay.

Mature products.

The Mature products, yeah...

Yeah.

I think we’ve talked about it before. Typically we would expect Mature and some of these other ones to go down over time, right, because as product age. Again as we take our new products into the Mature, there is a little bit of growth there and then – but we expect those to really be declining as part of the some things are falling off and becoming really the older products if you will, which are some of the things that we’re working on. But I would expect this, our Mainstream continues to do well which is actually did I think this quarter Mainstream was fine. Our Mature products were remodeled in and it will decline over time on a traditional basis. Some of that gets helped because – older like I said (inaudible) become older, frankly there is a little bit of that is going on.

Okay, fair enough then. And then it’s also interesting looking at your split of revenues between OEMs and distribution where distribution is actually held up also pretty well last couple of quarters and OEM is so – fairly seeing a little bit of decline in the third quarter given that you are selling into some of your large Chinese customers has directly through OEMs would make some sense, how do you expect the fourth quarter trends for that split of revenues to move?

I think that would be consistent – relatively consistent to what we saw this quarter. I think like you said distribution held up, we were surprised actually the distribution held up but then at the end of the quarter you typically have a pretty big ramp up because September is usually the biggest month of the year, right, September and March and this year September in the last couple of weeks just we are kind of averaged. And so distribution didn’t blow out the last month like it typically does and then like you said the larger customers had some issues with some of the comps degradations. So I think right now I mean I think you know that.

Okay and maybe just one last quick one from me couple of questions previously about your consumer business you talked about MachXO2 opportunities maybe two quarters out here, your consumer business seems to have a little bit more volatility than the rest of your business maybe it’s because you get some fairly larger opportunities that moving now pretty quickly, how narrow are some of those opportunities there and when do we see little bit more diversification there so we can see maybe a little less volatility in that consumer segment?

Yeah, I mean it’s funny you call volatility we always joke because we called it lumpy, right, and but the same word right. I think the issue is until we have a solid broad-base of customers that we are operating to in that consumer offering area, you are going to see it kind of move up and down. We’ve been surprised a little bit here and there because during the year we got one of the e-readers, it was a pretty big pop for us. We’ve been in some PCs, we’ve been in a couple things like that – that did really in that consumer market, at least we call it that as we market those things. So, what was interesting though is as we look forward, I think you are going to see that the higher percentage of our overall business and it will still fluctuate, but because it’s a higher percentage it will seem like the fluctuation is less. And so that’s kind of odd goal is to grow it to a point where it moves up and down. It’s not as detrimental as what we see today because today you can drop a couple of million dollars pretty quick in the top-line revenue just by somebody pushing something out. On the other hand, you can grow just as fast.

Okay. And just a follow-up there on your previous comments, Darin, you thought the XO2 might see some nice ramp up for being much more material in 2013. Well, we have to wait until timeframe to see that higher level, little less volatility in the consumer or can we start to see that next year?

No, I think you are going to see. – I think we will see some interesting consumer design wins on XO2 next year. The reason I said it’s going to take longer because there is also a kind of a main broad based digital service to those design wins take longer because consumer design wins are very quick and they ramp really fast, but they don’t last it long whereas the days if you look at MachXO has a very traditional base that continues to grow. When I say it’s going to take till 2013, I’m talking about that baseline stuff, but there will be some opportunities as we go through it.

Okay, got it, that makes sense. Thanks all of you for your comments, Darin. Thanks, Joe.

You got it, thanks.

And your final question comes from (inaudible) Williams.

Thank you taking my question. The last, gentlemen, nail to the more important ones, so all I’m left with is housekeepers. On OpEx, you said that would be flat and you’ve got revenue going down and your restructuring going down. Can you help me understand why the OpEx will stay flat?

There is a portion of cost related restructuring that are double counts going on so as we ramp the Manila site as we ramp down LPA. We have double counts going on as people move out and as we shift assets to different sites, that’s a portion of it.

Okay so go ahead, I’m sorry.

That’s the main portion of it to be honest.

Okay, so as we go into Q1, will the double count factor go away.

Double count factor will be gone, substantially complete, and we will be evaluating our model as we go into Q1 and how much we spend on R&D as we ramp derivatives that kind of issue comes into play so you may not see a decline going – a large decline going into Q1 but we will take advantage of what we can.

Okay, in 2012 what do you expect for tax rate there?

We haven’t modeled any tax rate in 2012. We’re still operating under NOLs. So,

Okay, you aren’t going to have to be in a position where you have to take those NOLs as one time profit and start paying tax at higher regular recording tax at higher rate.

That always is in play and we talk to the – with our accounts and with the auditors as we go forward in the year and we will be evaluating that. That gets evaluated on the yearly basis.

Got you. So, that’s a value added sometime this quarter and you just don’t know.

Yes.

Okay. One last question here on the XO2. You mentioned going into what I presume would be Smartphones design cycles, as you noted, are fairly short. So would we expect to see some designs hit production in 2012 then?

Yeah, I grew up in that market. All right, so I use to do a lot of flash business in global market and you are right. Those designs can happen in periods of six months or less and they ramp in a year and they are done. So it would be okay, can we get into those markets? Yes, those are the target markets if one hits, you would expect to ship some volume in 2012 for sure.

Okay. Don’t know if it is something you’re comfortable answering, but one last question on that subject then I’ll be done. What sort of applications are you’re going to support there?

In that – well, there is a lot of different applications. To be honest with you, there is tons. So you think about Smartphones, tablets, all those, there is a lot of different sensing technology that sort of associated with those. There is power management. There is some screen deals that you can do, there is a lot of applications when you create a price point and you also create a feature set it is very attractive and get some of that value proposition. So remember what we are known is the affordable, innovation guys, who are not expensive. We try to be the best priced for the applications and we’re not going to be the highest density and highest technology.

I love the new model and congratulations on wonderful execution. Thank you.

Thank you.

Sir, you have no further questions.

Okay, so just to close real quickly some final statements. Rough quarter for us obviously, you never like to miss your guidance or has to create new guidance. So it was a tough quarter, I think it was a tough quarter on a lot of people in the environment that we play. What we try to do is use the strengths and the things that we know, which is really focusing on the things that are within our control and not really focusing on the things without. So our cost structures, our R&D focus, our inventory management, I think we did a fabulous job this quarter of keeping our costs down, focusing on our inventory, and making sure that we don’t have inventory in the channel or in our own hands. Additionally, we continue to stay true to our R&D efficiency focus. We’ve made some big strides and the abilities for us to actually be able to execute on the products that we bring into market and we’re doing a good job of getting design wins on the new products that we already have out there. So we’ve got really three classification of products that are out there some are taking share, some are growing, and some are designing. So, it’s a good, it’s a good balanced, I think approach as we go through the market and you’ll know us as the guys that are really focused on un-grown but not necessarily everywhere, just where we can win and that’s what we’re trying to do. So thanks much for joining us on the call today.

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