Good day everyone and welcome to this Microchip Technology first quarter and fiscal year's 2010 financial results conference call. As a reminder today's call is being recorded. At this time, I would like to turn the call over to Mr. Eric Bjornholt, Chief Financial Officer. Please go ahead, sir.

During the course of this conference call, we will be making projections and other forward-looking statements regarding future events for the future financial performance of the company. We wish to caution you that those, such statements are predictions and actual events or results may differ materially. We refer you to our press release of today as well as our 10-K for the fiscal year ended March 31, 2009 and our 8-K current reports that we have filed with the SEC that identify important risk factors that may impact Microchip’s business and results of operations. In attendance with me today are Steve Sanghi, President and CEO, Ganesh Moorthy, Executive Vice President and COO and Gordon Parnell, Vice President, Business Development and Investor Relations. I will comment on our first quarter fiscal 2010 financial performance and Steve and Ganesh will then give their comments on the results, discuss the current business environment, discuss our guidance for the September quarter and update other pertinent matters regarding our business. We will then be available to respond to specific investor and analysts questions. Net sales for the June quarter were $192.9 million up approximately 11.4% from net sales of $173.3 million in the immediately preceding quarter, and down approximately 28.1% from net sales of $268.2 million in the prior year's first quarter. On a geographic basis, revenue in the Americas was up 4.7% in the June quarter. Europe was down 7.4%, and Asia was up 29.5%. Asia continues to be our largest geographic region representing 48.7% of sales. The Americas are 25.6% of sales, and Europe is 25.7% of sales. These measurements are based on where the product is delivered for manufacturing purposes for our customers, but does not necessarily represent, where the design activity is taking place to where the end product consumption is…

I will comment on the individual product lines. Let's start with microcontrollers. Our microcontrollers business was up strong 11.9% on a sequential basis. Flash Microcontrollers represented approximately 80.5% of our microcontroller business in the June quarter. Our 8-bit microcontrollers business had an excellent quarter, as all segments of our 8-bit product line experienced strong growth. Our 16-bit microcontroller business also had a strong quarter, with 15.7% sequential growth, and 33.3% growth from the year ago quarter, as well as another record for quarterly revenue. New customers and new designs going to production continue to help drive growth, as the number of volume 16-bit customers grew by 145 customers to 1,842. Our 32-bit microcontroller product line meanwhile continues to make good progress with the number of customers and volume production approaching 100. Moving to Development Tools, we had a record quarter with 35,608 development tool shipped in the June quarter. We also passed another key milestone, during the quarter with the shipment of our 800,000 cumulative development tool. Both milestones are indicative of continued strong design and activity and acceptance of our solutions by our customers and should bode well for future growth. In April, Microchip introduced industry's lowest power microcontrollers with the announcement of our XLP or extreme low power microcontrollers. The combination of high functionality and low power offered by Microchip is unparalleled among microcontrollers suppliers and capitalizes on an increasing trend of battery power and power-constrained applications. Since that announcement customer interest as well as our design win momentum has been strong and we have continue to press our advantage with the introduction of a steady stream of additional new XLP microcontrollers. We now have over 50 microcontrollers with extreme low power technology in production. Microchip is also continue to make significant strides in establishing our leadership in…

First of all we are getting a feedback that the webcast was started a few minutes late apparently someone forgot to push the button and some of the information that Eric gave especially geographic information was missed by the ones, who are listening to the webcast. So, I will give that information again. On a geographic basis, revenue in Americas was up 4.7% in the June quarter. Europe was down 7.4% and Asia was up 29.5%. Asia continues to be our largest geographic region representing 48.7% of sales, the Americas at 25.6% of sales and Europe is 25.7% of sales. These measurements are based on where the product is delivered for manufacturing purposes and it doesn't necessarily represent, where the design activity maybe taking place. That was the part that was missed. Today I would like to first reflect on the results of the June quarter, and then I will talk about our guidance for our September 2009 quarter. The June quarter saw a strong rebound from the bottom established in the March quarter. We originally set our internal plan for the June quarter at up 5% sequentially. In early June, we guided up to between 8% and 10% growth, and I am pleased to report that we exceeded the high end of that guidance, by achieving a sequential revenue growth of 11.4%. We also exceeded the gross margin guidance, beating the high end of the gross margin guidance by 70 basis points. The strength of our gross margins continues to validate the strong proprietary value embedded in our products and our franchise. Our earnings per share both GAAP and non-GAAP exceeded the high end of our guidance on the strength of strong revenue growth, strong gross margins, and excellent cost control on the operating expense side. Our inventory came…

(Operator Instructions). Our first question comes from Brendan Furlong from Miller Tabak.

Quick question on the SG&A, should we think about it, running in the 32% to 33% for the foreseeable future here for the next three, four quarters at least?

Well, you can see from the information in the press release and the outlook section that we have actually, the range is to be flat to down up to about 75 basis points. It will depending on what revenue that we can see some incremental leverage there.

I’m looking more into Q3 and into fiscal '11, should we consider more or less around the same percentage of revenues?

It will largely depend on how much revenue growth is there beyond this quarter and we don't have visibility, but with revenue growth you should continue to see some operating leverage.

Okay. My other housekeeping question, then just on the tax rate going forward, you are guiding 12% next quarter. Should we consider that the run rate on the future quarters?

Yes.

Our next question comes from Kevin Cassidy from Thomas Weisel partner.

On the automotive side, what's your exposure to Europe and Asia and US, as you compare the three markets?

Our exposure every time we have looked at is really nearly a third, a third, a third.

Okay. So, your US was up 10%. So, were you stronger in any one of them, Europe or Asia?

You have to be.

Which one of, which one?

We don't have the info.

Both of them were strong.

Okay. Is it analog products along with microcontrollers, or is it just the microcontrollers, that you are selling into automotive.

We sell all of our products, but the dominant really are microcontrollers. That's the majority of our business. The analog portion in automotive will be relatively small.

Okay. I guess just as we were talking about the different markets and as you are gaining back market share. Do you think some of it is related to the markets you addressed growing faster than some of the other markets or is it a complete swap out of one microcontroller for your microcontroller?

Well, Kevin, you used the word gaining back market share. Our data does not show that we lost any market share. It was a direct correlation to the consumer segment and housing basically leading the downturn, and it was so strong that it took the global financial system into a melt down, but when that was happening and we were seeing a substantial fall from it. Other companies were not as exposed to it and no matter how much we explained it, I don't think it ever got through and we were winning a large number of design wins. We were doing record number of development systems quarter after quarter. The 16-bit growth was strong, and you are seeing the result of many of this design going to production. So, there really not any dislocations from our standpoint, we had a heavy concentration in consumer and automotive and consumer clearly led the decline and automotive then joined later. So, during that time, yes we had largest fall than some of the competitors, but as we have said our 8-bit market share is the largest we have ever had 8-bit market share.

Our next question comes from Ruben Roy from Pacific Crest Securities.

Hi, Steve, I don't think you talked too much about the industrial market. Can you give us an update on what's going on there and what your outlook is for industrial?

This is Ganesh. The breath of what we are seeing in the market is, across all the segments that we participate in. So, clearly not only have we seen it in automotive and home appliances, as Steve talked about, but the other segments including industrial have shown strength and many of those are designs we have been incubating and working on. Some of them are older designs, as they come back into a higher level of consumption. So, industrial has been good.

Okay. Ganesh, do you have a 16-bit development tool number for the quarter?

I don't have it, off the top of my head, but we will get one to you.

Okay and then just I guess for Eric, there was a question on OpEx maybe I’ll ask a little bit differently. We are seeing some stabilization here and then Steve talked a bottom being established in March. It is an improvement in the environment, how are you going to start thinking about potentially getting more aggressive with investing in the business?

Well, we feel that we are investing in the business as appropriate. We still think that our operating expense as a percentage of sales compared to others is really quite good, but we are not under-investing in the business to make sure that we continue to have success with future design wins and new products.

Remember through the downturn we did not do any layoff. So, all of our sales and marketing and design and product resources have been fully invested. So, product line is just absolutely awesome and fully trained people going to take it to market. So, we have essentially been ready more than ever before very, very, strong recovery trough the downturn as we came out, product line is very strong, lots of new products. We are not hiring now to really build back because we let whole bunch of people go. We cut expenses largely through pay cuts and zeroing of the bonuses and as the businesses recovering now; we are giving some of the pay cuts back to the employees. So, that’s adding little bit to the operating expense, but the revenue is growing faster than that. So, we are getting operating leverage at the same time, we have all these trained employees doing an awesome job of improving everything in the company.

Great and then just last question. Can you give us a utilization level for the June quarter and then the outlook for September?

All we can say is the utilization will be higher this quarter than last quarter. We have stopped giving the numbers because we have found it to be very confusing. There are many technologies, some have less number of steps and some have larger numbers of steps, portion of the business comes from foundries and you can't really plug from point A to point B and based on the revenue, calculate the gross margin. It does not work and we have found that’s an extrapolation by the analysts to be highly confusing and misleading. Basically giving you the guidance, we gave you the guidance for the gross margin for the September quarter, and we also gave you guidance for the following couple of quarters with about 100 basis points improvement in each quarter.

All right and then sorry, Steve just one last one, I think historically the September-quarter has been back end loaded. Do you expect linearity to be any difference in this quarter for any reason?

The backlog is very strong for September quarter. Usually it slows down quite a bit and usually you get a lot of the orders in September, but this time it’s different. This time we had very strong bookings in July, August can seem to be very, very strong. The backlog is filling very nicely and that's why we reverted from giving you a internal target back to giving guidance. For the last two quarters we gave you internal target, we didn’t give you guidance. We gave you guidance and we also gave you fairly narrower guidance compared to many of our competitors because our backlog is very strong.

(Operator Instructions). Our next question comes from John Barton with Cowen.

Steve you highlighted the fact you have customers coming to you because of some of the challenges that your competitors are having, some economic-driven M&A etcetera. How od you see that over the next several quarters? Do you think as the economy stabilizes, you won't have that same trend? How are you feeling about that?

I’d expect it to increase because the merger hasn't happened yet. So, as the merger happens and as we start to rationalize product lines and architectures and combine sales offices and distributors and one salesman stays and the other one goes and all of these changes. So, we are simply seeing the front end of really what people maybe concerned about, but the restructuring is not only and you see in the assets, as you can see everyone of our competitors essentially is restructuring significantly, most of the competitors. So, there is a lot of continuation. Over the years, in the last 20 years or so, we have not seen customers largely concerned about whether their supplier makes money. If a customer is getting a good product at a good cost, they don't really care, whether the supplier is financially profitable or not. First time ever through the cycle, we are seeing people really concerned because some of the people have not received the support through very large layoffs and other lot of companies have lost the support they used to get from the suppliers, maybe technical support, maybe customer service, maybe a specific sales people or the samples or whatever it maybe. People are experiencing significantly lower support. One company that hasn't cut back on that support at all is Microchip.

Any response to previous question about OpEx? You alluded decidedly a bit issuing out of bonus, pay cuts I think what I heard you say, just want to clarify this. You have already started to return some of those cuts, we saw some of it in the June quarter, you will continue going forward, but you will do it at a rate that’s slower than the revenue growth. We don’t have to worry about the step functional up OpEx, impacting the bottom line in the foreseeable future. Did I interpret your statements correctly?

Yes, correctly. You should continue to see operating expense leverage.

Last question if I could, last quarter you talked about the fact that M&A’s strategy was pretty much limited to small technology tuck in type affairs, still looking at it that way does the stabilization of the end market change your view of that?

It does not change the view of that.

We will now go to Christ Danely from JPMorgan.

This is Boyd Jim for Chris. I want to get a sense of which you think relative to growth rates in your MCU analog memory businesses for the next few quarters, but the some of the drivers (Inaudible) say for that.

I don't want to break out the growth rates at that level of fineness, but the drivers that are going to be producing that growth. We expect 8-bit will grow. It is the largest piece of the microcontroller business. The 16-bit will grow at an even faster rate, than that. We expect the 32-bit growth to be as good a better than, where 16-bit is at so. All aspects of microcontrollers we expect will grow, but the newer product lines having much faster growth. We expect analog for several quarters here is going to have very good growth. The product line has had an excellent acceptance and designs wins. You have seen that already in the last quarter with over 12% growth. You are going to see that for several quarters here. So, those are the fundamental drivers. It’s our microcontroller business 8, 16s, 32s and is a analog business.

Just another question around your memory business, how your prices trending in that business? In the past quarter and going forward?

Memory is a competitive market. We play in the aspects of those business that are important for us to be in. We are not trying to chase revenue at the expense of gross margins in that business. Our ASPs have been trending down at a historical rate, but nothing that is of concern to us.

Just one last question, it sounds like your auto business did really well. How is your auto compared to your peek historically? Is it how much down is it in comparison to the peek?

I don't have a percentage of where it’s going to be. Obviously it went down as a percentage as automotive had its decline, but it’s not that easy for us to be able to track at a fine detail of every automotive account. I think what Steve gave was a sense of a representative sample of our large automotive customers that we have direct insight into.

62% of our business it’s from distribution, where we do not get a break down, whether they are consumer, industrial, automotive or what. So, these can vertical market analysis, we hardly ever do, and we internally see no value because our products are standard to go into all five markets. So, once in a while, when there is a lot of noise on Wall Street, we can do a simple analysis like we have done this time, but routinely we are not run by vertical markets. We run horizontally by producing very feature rich productions that sell horizontally across all markets to 70,000 customers.

Our next question comes from Gil Alexander from Darphil Associates.

Could you give us an idea of what the market share is in the field programmable 8-bit market?

Well, I can say that it is very high, when we used to track that and used to break these numbers out, our market share was about a third of the entire market.

Right.

Since then significant additional portion of the market has converted from non-field programmable to field programmable. Everybody else, who wasn't making field programmable microcontroller is now making field programmable, and a lot of the competitors have converted their non-field programmable customers to their field programmable. So, majority of the market is field programmable. So, market share of the overall market is like I said it’s a record in the first half, and market share of field programmable market is even higher than that, but we don't know what the number is.

I know we're in recovery state, but is there a way of judging what the 8-bit programmable market should grow over the next few years. It’s tough to do. Because you are in a recovery state, but should it be something like 5% to 7%, if you took out the recovery of the market?

We don't really know how to put numbers on them, when various market analysts are $1 billion apart on the $5.5 million market on the size of the 8-bit market, then 5% differential analysis is not meaningful. That has been the main issue that, unlike SPGAs unlike microprocessors, microcontroller market is highly fragmented with large number of competitors having significant internal consumption especially in Japan and Europe and the overall size of the microcontroller market that we hear from SIA never jives with what we hear from any of the other market analysts, which give a break down by company, like data processing and others. So, this has always been a big challenge. So, you pick your target either look at Dataquest or look at SIA or look at somebody else and consistently watch them and you can see a trend, but if you jump around and try to figure out what the size of the market is, you get a number of plus or minus $1 billion. So, by consistently watching the number we are telling you that our market share for 8-bit microcontroller is the highest we have ever had.

Just for housekeeping, what’s your depreciation estimate for the year?

It is about $88 million.

Our next question comes from Craig Ellis from Caris & Company Craig Ellis - Caris & Company: Steve, you provided some commentary on potential gross margin met in the second half of the year. Obviously there was some underlying revenue assumptions around that. I am wondering you can provide some color there, whether it’s just normal seasonality, something north or south of normal and whether you think there is any channel inventory build that might be occurring there, as we think about those parameters.

It is north of normal. That's really all I can say. Craig Ellis - Caris & Company: Okay and then switching gears regionally, Europe was down in the June quarter, no surprise it seems like everybody just talked about Europe is seeing weakness there, but as you have moved into the first fiscal quarter, are you starting to see that geography stabilized or what you are seeing out of Europe, as you start to move through the quarter?

Europe seasonally is the weakest in the summer quarter, which is the quarter, we are in right now. We are not seeing it this year, and it could just be driven by usually they're very strong in the March quarter and this year they were not. There was the depth of the recession for them. Usually they are okay in June quarter and they were not. They were down. So, you are getting some effect now in the current quarter, where they usually down this quarter and this quarter it doesn’t look like. So, seasonalities all screwed up by geography. I think as this business recovers in another year or so, we are going to have to almost establish what the cyclicality of each geographies and what the cyclicality of the business is. Craig Ellis - Caris & Company: Okay. So, you have started to see an improvement in your European business.

Yes. Craig Ellis - Caris & Company: Okay and then lastly from me, you mentioned that you see plenty of opportunity for share gain out there, can you pin point some of the opportunities that you see?

Broadly we are gaining share in every single market, 8-bit, 16-bit, 32-bit and analog. You could break it out by vertical markets. We don't have that tracking, but it seems like we are gaining share in automotive, in industrial, in medical and by applications. We serve thousands of applications. We are in everything you own or everything you see that has power connected to it.

(Operator Instructions). Our next question comes from John Pitzer from Credit Suisse.

Steve, just wondering, when you look at the September revenue guidance, what’s the expectation for just the inventories? You expect September to be a quarter, where inventories stay flat, go down, build a little bit?

We would project that in terms of number of days that inventories are going to hold that would be about flat.

About flat sequentially?

In day, in dollars we would expect it to be up to maintain that level of days with increasing revenue.

Then Steve is there any way to quantify the dollar opportunity with NEC- Renesas merger as far as what’s you can potentially pick up and what timeframe?

I don’t know how to do that.

It’s a target rich environment. They have a lots business so.

Steve if not a dollar amount, what kind of time line would you expect to start to see any potentially share gain start run in to the P&L?

It’s a usual start. Certain fast moving application the design cycle can be faster than six months, but majority of that is, year, year and half and slow moving not even longer. So, it just you don't really know. People are in all different stages, when the design is going to finish. When the design comes up for renewal, everybody just doesn't get up one day and say okay let's move. They move because there is a platform change coming up or an upgrade design coming up or buys no longer available, and there is just nowhere to speculate anything like that right now.

Steven, just given the book-to-bill number for June of 1.18, the guidance for revenue to be up 7% to 11%. My understanding as you would expect that the September quarter would actually be stronger linearity in the first half and then slow because of Europe, its seasonality in the second half of the September quarter. Is that the way to think of it?

If you are trying to talk about book-to-bill and the revenue growth in the breadth is never worked and we have told you that many times before. There is no correlation. There is no correlation historically between a book-to-bill ratio and revenue growth. Book-to-bill ratio is simply function of whether the customer is placed the orders early or placed it orders in the quarter.

Okay. If I take book-to-bill, at the questions you just linearity in the September quarter front half loaded and then slowing in the second half around normal seasonal or?

For the shipments are not linear. The visibility has improved. So, we have very strong backlog, the quarter is normal in terms of linearity. So, we are going to have no shipments in July and no shipments in August and all the shipments are in September. It is fairly linear and it is linear because the backlog is very healthy.

To my last question, is around geographic break down of revenue. I understand it is where you ship not where the end product finally gets consumed, but if you had to take a guess of your exposure to Asia from a consumption standpoint. What would be the right ballpark to think?

I don't have a number that I can backed by analysis. It will be just bring it out of the air.

Now we will go to Brendan Furlong with Miller Tabak.

Thank you for the follow through question. On the 16-bit 33% growth year-over-year, obviously impressive growth rate there, I don’t know if you can tell me what end markets, what products or what is driving that growth rate in your 16-bit?

We never had particular end market strategy to drive growth. There is a lot of hard work that has gone in over the years to create the products to create the support infrastructure from both our own field sales team as well as our partners. It is a very broad range of customers and application that is driving that growth and we have consistently worked on the building the revenue pipeline, and what’s you are seeing is a fruits of hard work that have been done over many, many years to build it and we expect that to continue for a long time.

I guess my last question. I know you probably not going to go there and just one, but. On your touch sensing you have 100-customer shipping in volume, any ballpark in terms of percentage of revenue or dollar value?

No, we don't break out by customer or market segment that way.

There are no further questions. I would like to turn the conference back over to our presenters for additional or closing remarks.

We want to thank you everybody for attending the conference call and our apology again for some rough start especially on the webcast side. Hopefully you have the information you need and if you don't, just call us and we will give it to you. Thank you very much and we will see many of you on the road this quarter. Bye, bye.

This concludes today's presentation. Thank you for your participation.