I would like to welcome everyone to the Q2 fiscal year 2010 Semtech Corporation earnings release. (Operator Instructions) I would now like to turn the call over to Mr. Chris Rogers, Director of Financial Planning and Analysis and Investor Relations.

Welcome to our fiscal year 2010 second quarter conference call. We have just issued our press release announcing our unaudited results for our second quarter ending July 26, 2009. A copy of our press release is available on our website, www.semtech.com as well as national news and financial market wires. A replay of this call will also be available on the investor relations section of our website through September 19. During this call, Mohan Maheswaran, Semtech's President and Chief Executive Officer and Emeka Chukwu, our Chief Financial Officer will be discussing our results and answering your questions. Our call today will include forward-looking statements that include risks and uncertainties that could cause actual results to differ materially from those made during this call. We encourage you to review the Safe Harbor statements included in today's press release as well as other risk factors noted in Semtech's most recent periodic reporting documents on Forms 10-Q and 10-K filed with the SEC for more detailed discussions. Also during this call we may refer to pro forma or other financial measures that are not prepared according to generally accepted accounting principals. In conjunction, we have provided supplemental information in our press release to help readers understand the company's comparable financial performance between periods. I would also like to mention that during the third quarter we will be presenting on September 10 at the Citigroup's 16th Annual Global Technology Conference in New York City and on September 21 at Bank of America, Merrill Lynch 2009 Small Mid Cap Conference in Boston. Thanks for you attention to this important preliminary information. I will now turn the call over to Emeka Chukwu, Semtech's CFO.

Revenues for the second quarter fiscal 2010 were $66.3 million, a 10% sequential increase and down 15% from the second quarter last year. On a year over year basis, revenues declined across all end markets. Our GAAP net income for the quarter was $7.4 million or $0.12 per diluted share, down from $11.7 million or $0.18 per share for the same quarter last year but up from net income of $4.9 million or $0.08 per share for the first quarter of 2010. In the third quarter of fiscal 2010 we expect GAAP net income of $0.12 to $0.14 per diluted share. In the second quarter 60% of our revenues were derived from our customers in Asia, 25% from North America and 15% from Europe. Direct sales represented approximately 49% of total revenues while distribution made up 51% of total revenues. Bookings were up sequentially in Q2 and our book to bill was approximately one. We saw increases in all end markets with the exception of industrial. Net orders accounted for 40% of shipments during the quarters. In the second quarter we continued the cost reductions initiatives that were implemented in the fourth quarter of 2009 including time off and a tight monitoring of discretionary spending. Beginning in the third quarter we have terminated the company's mandatory time off program. Other initiatives such as planned lower payout on the company's bonus program, suspension of the company's matching programs and the suspension of non critical hiring will continue. In the second quarter expenses related to base compensation were $5 million or 8% of revenue. This is an increase of approximately $200,000 from the first quarter of fiscal 2010. This sequential increase was driven by mark to market adjustments on pro forma based awards which can be settled in cash. These adjustments were…

Good afternoon everyone. I will discuss our Q2 fiscal 2010 performance by end market and by product group and then discuss our Q3 fiscal 2010 outlook. Q2 of fiscal 2010 was another very good quarter for Semtech. We achieved net revenues of $66.3 million. This is above the high end of our revenue guidance and represents a 10% sequential increase versus Q1 of fiscal year 2010. We also maintained 54.5% GAAP gross margins and our GAAP earnings per share increased by 50% to $0.12 per diluted share. In Q2, revenues from Communications increased and represented approximately 20% of revenues. High end consumer revenues increased and represented 40% of revenues. Industrial revenues were down and represented approximately 25% of revenues while Computing revenues increased and represented approximately 15% of revenues. As we anticipated, we saw seasonal increases in our consumer and computing businesses and there was relative strength from the communications segment. The industrial segment was noticeably softer in Q2. European and North American industrial segments were particularly soft in Q2. Now let me discuss the performance of each of our product groups in Q2. In Q2 our Power Management revenues increased sequentially by 29%. Strength in our Power Management business was driven by the computing, communications and high end consumer markets. Our Power Management business continues to become a more diverse business with revenue contributions from all major market segments. New power platforms released in the last 12 months are gaining traction. As the overall market improves, and our new Power Management platform releases, and design wins accelerates, we expect that our Power Management business will continue to evolve into a more balanced business for Semtech. We are very encouraged by the quality of some of our new products and the traction that customers in all our geographical regions. We…

(Operator Instructions) Your first question comes from Harsh Kumar – Morgan Keegan.

I listened to a competitor's call. They mentioned the China base station business had paused for them a little bit and expected it to come back. I'm hearing maybe something similar on your call. If I'm not mistaken you said comm was a little off and then you're expecting…what do you think is going on in that business? Any clarity would be very helpful.

I think there's two elements to the China comm market. One is the existing infrastructure and what we saw back in Q1 was the stimulus driving more demand for existing infrastructure. But also what's going on not only in China, I would say in other parts of the world is deployment of more Greenfield infrastructure, 3G, 4G, WiMax infrastructure that doesn't exist, and I think that demand continues to be quite strong. It is up and down quarter to quarter, but I think in general the trend is upwards and we saw as I mentioned, record bookings in our advanced comm infrastructure was really driven by the new infrastructure versus the mature infrastructure.

As you look out, and I hate to put you in a spot, but let's just say you look out further than your current Q3 quarter, are you taking orders or do you have any kind of visibility into the end of the year at this point in time?

We have demand forecasts that looks out. Obviously we don't guide for Q4 and seasonally Q4 is usually down. I would say this year is probably a little bit unusual in that industrial has been incredibly weak so far. So we may see a little bit of difference there. Comm continues to be strong, and I think consumer and computing are really the questions as to what happens in the end of Q3 and as we go into Q4 and how strong Christmas is. So I think it's a little bit of a question mark there, but at this point, we're fairly bullish on the situation.

Any change to your long term model? You're kind of making pretty good progress towards your 55% to 65% gross margin goal and all the stuff that follows with that operating margins etc. At this point do you still feel pretty comfortable with what you said before? Could you reiterate that maybe?

At this time we are very comfortable. There is no reason to change anything or the strategy that we've made, continues to point to the fact that the model of 55% to 60% is definitely achievable and sustainable when we get there and also the operating margin model of 20% to 25% on a GAAP basis. So at this point we do feel very good about the model.

Your next question comes from Terrance Whelan – Citi.

I think you concluded your discussion about ACS by despite it declining about 5% sequentially, you said it was going to actually grow quite significantly and I know you had some details of that segment, but if you were to point out one or two sub segments within the ACS that are driving growth next quarter, what should we focus on?

Comments, obviously our record bookings for the comm infrastructure probably means it will ship more comm in the following quarters so I would expect comm to continue to be strong. And this is really driven by the emerging segments of 3G, 4G IP back wall, WiMax, multi-protocol type stations. So this stuff is going to go for awhile. Time to revenue tends to be a little bit longer but now we're starting to see traction, I think it's going to be there for awhile. So that's definitely driving growth. I think there's going to be, and we're seeing a little bit signs that industrial is going to come back a little bit. I don't know how strong, but that one I expect to see a little bit of a pick up versus what we've seen so far. And then in general, I think we have got very good design win momentum of some of the RF and Sensing applications both in the industrial, but also in the consumer space and that should drive some growth also.

You did a nice job at holding the line on gross margin despite the growth that you witnessed in computing and consumer. At what point over the next several quarters might we see an upward inflection in gross margin and will that be driven more by a pick up in industrial or by a waning in the still below corporate gross margin computing power business?

I think the main driver is going to be the Power Management business as a whole. The new platform is starting to get traction. Even within computing new Power Management platforms drive a higher gross margin for us so I think that's one thing. I think the advanced common sensing, the more communications, obviously drives a much higher gross margin for us and so that's a good sign. The Janus products that I talked about in our Power Suite business drives a higher gross margin for us. So those are all positives for us and there are still some yield improvements and things that will give us some benefit in the Power Discrete business. But it's really mix and new products. In general, computing and consumer drive lower gross margin and industrial and comm drive higher gross margin, and if you look at our balance today, we're quite nicely balanced. We'd like to see probably a little bit more comm, a little bit more industrial, a little bit less consumer and then more new products driving the mix and that should help us to expand our gross margins.

Your next question comes from Steven Smigie – Raymond James.

I was hoping you could talk a little bit more about the Power Management business. I seems like you're getting some traction there which is pretty encouraging. I know you mentioned the categories generally, consumer is doing well. Within consumer, can you point to what applications you're actually showing up on?

We're doing quite well on hand held. Smart phones, GPS, cameras in general and also in the high end consumer, some of the TV's, displays, we're doing quite well. We started to get some traction in picture frames and things like that. If you want to break out some of the other areas, computing has historically done well in notebooks and desktops. I think we're doing quite well in net books. We're doing quite well in the peripheral space in computing which is encouraging because I'd like to note that computing today is I think now this quarter, last quarter was a 15% to the company. I think we could probably do with that up a little bit. It's a little bit low. And then in the general comm and industrial space, I think we're doing quite well in the routers, base stations, some of the wireless LAN applications. So it's kind of a mix of it. Before, we had such a focus on the computing space that we were blind I think to the broader SAN that existed for us and I think now with a lot of the new platforms, we are attacking the broader SAN and that's really our strategy in Power is to really go after the rest of the SAN versus just the computing segment.

In the computing wins that you've gotten, I assume that [inaudible] more monetized sockets or VR-11 sockets?

That's correct. We are going after within the computers themselves, displays, we're going after the peripheral stuff, some of the regulators that drive some of the rails versus the core regulator, and it's obviously some of the peripheral products that we're doing quite well in servers and printers and that area.

Turning to the wireless business, encouraging to see the signs there as well. For the 4G stuff you talked about, is that more on the WiMax side where you're seeing the orders versus LTE or is it pretty much spread across both those areas?

A little bit of both. I would say it's more 3G, 4G IP back hall infrastructure. WiMax is very small at this point in time. We are seeing a little bit of traction there, but it's more the multi-protocol base stations for IP back hall.

On the Power Discrete business, you saw some softness there. How did the mixed data points on the military, aerospace, I heard some real strength and a couple of points of weakness. Can you talk a little bit about why that was sort of soft on the military aerospace? I would have expected t hat to be a little bit stronger there.

Actually the military, industrial and medical for Power Discrete was softer this quarter, there's no question about it and it has come down. There are customers on the military side for example, are waiting for in many cases budgets to get to the point where they can actually spend money on some areas. So while there's no risk I think of them cancelling programs or anything like that, I think that they're just soft. We've seen that across the board in the military and industrial. And it's not just one customer. It's a number of customers. I think that's a common theme. I think military and industrial is generally soft. On the other side of that, I think the space area, space segment is quite strong, particularly military commercial satellites and we are seeing an increased amount of that. Now that's a new SAN for us, so we've just started to play in that, so that's a good sign. But I think it's going to take us awhile to get back to the Power Discrete growing.

Your next question comes from Sumit Dhanda – Bank of America/Merrill Lynch.

On the expense increases that you're seeing associated with the stoppage of the time off programs and the higher litigation, higher selling costs, can you help us understand whether there's additional normalization of expenses yet to take place or especially as it may relate to variable comp or profit sharing, or is this sort of the extent of the normalization we expect as revenues that return not quite to the normal run rate but something closer to that.

If you go back and look at the history of our financials, our total operating expenses on a quarterly basis is usually $30 million to $31 million run rate and with the guidance that we have right now, we're coming up to about $29.5 million or thereabouts. In the prepared portion of my remarks, I did indicate that there was still some expenses that we have not brought back. We still have not brought back, we reduced the rate of expected payout on the bonus programs. We're still not hiring unless it is absolutely necessary. We are still suspending our company matching programs. So yes, there are definitely some expenses that we have not brought back yet.

So $31 million is the right run rate to think about?

I would think so. In the $30 million to $31 million run rate is the normalized level. But I want to point out on that subject, what we have said is that we would expect that level of expenditure, the $30 million to $31 million that we would expect that to support revenues of $85 million to $90 million. So definitely there is a lot of leverage on the EPS.

The foreign exchange losses you talked about associated with the weaker dollar, could you just walk us through the mechanics of that and what do we need to think about from a currency perspective to model that appropriately going forward?

I don't know how you model that, but what is going on is that we do have some of our foreign subsidiaries that have the U.S. dollar as their functional currency. So we have to at the end of every period revalue the balance sheet items that are denominated in foreign currency to reflect the changes in the exchange rates. So typically a rule of thumb is that when the dollar strengthens against the foreign currencies, that is a benefit to our P&L. When it gets weaker, it's a downside to our P&L. Just to give you a little bit more detail, there are three currencies that really applies this is the British Pound, the Swiss Franc and the Mexican Peso.

On the advanced comm and sensing group and expectations, you're clearly talking about a rebound in comm infrastructure, anything more you could share with us on your traction with new sensing platforms? I know you talked about that almost a year ago and the fact that the second half of this year might see that ramp come to fruition.

We had very good design wins with our wireless sensing products, really, really good designs wins, good applications, good customers. They just haven't turned to revenue and I think there's a time issue with that. I think the time to revenue is a little bit longer than we would like. Part of it is the industrial sector is a little bit behind the rest in picking up here. But I think we are very hopeful and very excited by some of the applications because they are in new areas that I do think are being driven by the whole energy push and by the green standards and by a number of initiatives in both the home automation and industrial automation markets that I think ultimately they will transpire. It's just a timing question.

Your next question comes from Doug Freedman – Broadpoint Amtech.

Can you give us a little insight into the way we should think about the 14 week January quarter? It's a little tough to model given the fact that it kind of run over the holiday period. Are there any actions you might be taking on the expense lines? How much of an increase are you expecting to see? I know it 5% to 7% increase in days. Is that the way we should think about it? 5% to 7% both in the revenue capture and 5% to 7% increase in expenses?

Let me take the expense portion and Mohan can answer the revenue portion. On the expenses, our overall goal is to try to keep expenses in Q4 flat to Q3 or just with a slight increase. Obviously we're not guiding to Q4 at this point so we'll work out the details as we get closer to Q4, but our goal would be to try to keep expenses flat to Q3.

Revenue is kind of tough. We haven't looked out that far really. Obviously we have a Q4 demand forecast review today, but I'm not sure that it really takes into account that extra week. My own sense is Q4 typically is down for us seasonally and this quarter this year might be a little bit of an anomaly but that's about all I can comment on what I expect at this point.

You're in the range in terms of gross margin at the low end 55%. Traditionally in the past the Power Management segments has brought higher gross margins. Is there anything that you're seeing as far as price pressure in the marketplace that is changing your gross margin outlook of any of your segments?

You've got to look at it both from a vertical market segment and a product segment. So from a market segment obviously computing and consumer tend to be lower gross margin. Industrial and comm tend to be higher as you know, and I think the mix for us if I look at our Power Management business has historically been, the majority of it has been computing and consumer driven and we're now starting to get a little bit more comm, a little bit more general purpose, a little bit more industrial, a little bit more balance in that business. So that's one of the reasons why gross margins in that business should expand. But I think the other thing is just new product platforms. So the price pressure that we see in the normal consumer environment and a normal computing environment is offset somewhat by cost reductions and then we see the new products that we bring out should give us the expansion. The gross margin play for us is definitely new power platforms, new ACS platforms, more comm, more Janus, high yields in our Power Suite fab and then just generally trying to maintain the cost road maps we have in our normal product strategies.

On your tax rate planning, anything that you see happening as far as legislation? What type of impact, if you've taken any look at that should we think could occur next year?

We're definitely aware of all the proposals that are coming out of the government, but at this point we're not really concerned about anything that we've heard. There's nothing that we're really worried about as of now. We expect our tax rate to behave normally.

Do you have a number for us for next year? Are we thinking that that comes back up to 20% to 23%?

I don't have a number at this point. All I have to look at is just what the tax rate is going to be for the rest of the year. I have not looked that far out into 2011, but I wouldn't expect it to be anything out of the ordinary.

Your next question comes from [James Snyder – Goldman Sachs] [James Snyder: If you could address the industrial segment for a minute. Some of your competitors have talked about a bounce back in industrial and some signs of life both there and in automotive. It seems maybe not quite what you're seeing at least yet. Can you talk about some of your end market exposure there and whether you're seeing any bounce both in the broader OEM industrial space as well as the broader distribution base of smaller customers.

We've seen industrial, at least for the first half, particularly in North American and Europe as being very, very weak. In Q2 we found North American distribution; European distribution was very weak and just broad industrial customers not ordering as much. There has been signs of a little bit, I don't know if bounce back is the right word, but improvement, and so that's encouraging going forward. But I don't know if I can say it's back to the robust levels of the past. So that would be the thing I would caution. I think also distribution is still both in North America and Europe from what I've seen so far is not as healthy as we'd like it to be. [James Snyder: Following up on your earlier question on OpEx, you talked about the normalized run rate being $30 million to $31 million. Is there something you have to see for you to release that extra million or two of OpEx? Is it a certain revenue level or is it a certain cash level, or should we just think about drifting slowly up towards that level over the next couple of quarters.

I think what's going to happen is we're just going to keep an eye on the top line, see what the top line is doing. That would determine how quickly we bring expense back. But I think it's probably going to take revenues of about $75 million to $80 million a quarter for us to really get back to the normalized run rate. But there isn't really anything that we're looking at but the hope is that the revenue will continue to see a nice increase in the top line and that would allow us to gradually bring back expenses at more normal levels.

One of the important take aways is that we'll manage the OpEx according to what we see both in the current quarter and future quarters. If we don't see the demand coming in strong, we may be more aggressive in how we manage the OpEx downwards. There's also a couple of factors a little bit out of our control. One of them is litigation expense and then the equity expense is driven also by to some extent the stock price and things like that. [James Snyder: Talking about the Power Discrete business and some of your products you're trying to ramp there, if you look out a couple of years, what do you think the market opportunity would be for your business in Power Discrete, incremental to what you're already doing?

I think the good thing about the Power Discrete space for us is we are coming back into it, so I look at this as a $100 million to $150 million SAN of which we play a very small percentage today and the driving force behind expansion of growth of our revenues is going to bringing out new products and going after one competitor, and that's Micro Semi who has a much larger revenue base. So the Janus is a good example of that. As we come out with more Janus products I'm quite confident that we can get more business in the military and commercial satellite space. We'll start to focus on some other new product areas as well and gradually expand into that SAN and one of the constraints that we have today is our fab which is now starting to get back on track, and I think the supply through put as we get more products out, we'll be able to expand our revenue.

Your next question comes from Harsh Kumar – Morgan Keegan.

Can you give me some idea of what can be the benefit as you get back to a normalized level? Perhaps you can quantify it on the gross margins? And also as far as your long term model is concerned, what kind of revenue number should we be thinking of to get to that 55% to 65% gross margin number?

To get to the mid point of the 55% to 65% I think what we've said in the past is that we would need revenues of $85 million to $90 million a quarter, and also we would need that revenue to come in the right mix. That's more than having to carry a little bit more from the communications and industrial side. I think that would help us to get to that. So in terms of revenue, $85 million to $90 million is probably the revenue that I would expect to see us get to the mid point of the gross margin model. With regards to coming back online, there's probably going to be two aspects to it. There will be just the yearly just on driving better through puts and what I'm hoping is that with improve yields and the demand coming back that the revenue from our products will start to grow again. So there's probably going to be two drivers pushing our gross margin upwards. I don't know that I can really quantify it right now exactly how much a boost that will be to gross margin, but rest assured that it will be very helpful.

Your next question comes from Terrance Whelan – Citi.

You had mentioned that cash flow operations and CapEx number, can you repeat those?

The cash flow from operations was $19.2 million and in Q2 we spent $2 million on CapEx. The forecast is that we're going to spend $5 million in Q3 and the increases are driven by a whole lot of new product and new process and packaging development.

I think you said you expect $1 million in legal expense, so that would be about $0.013 out of your earnings, but that's included in the $0.12 to $0.14 guidance, correct?

That is included in the guidance.

Your next question comes from Ryan for Rick Schafer – Oppenheimer.

I wanted to get a quick follow up in regard to Power Discrete. What proportion of sales are made up from that segment as well as how many products and design wins did you get in the most recent quarter from that segment?

We don't talk about design wins on a product by product basis. Power Discrete is 11% of our Q2 revenue.

What was the prior quarter?

13% in the prior quarter.

Your next question comes from Doug Freedman – Broadpoint Amtech.

You were able to benefit from some insurance claims. Are there any outstanding or has all the insurance stuff been cleaned up now?

The insurance refund that we benefited from was just a refund from the legal expenses associated with the stock options matter. That was just a one time thing. I think you're probably thinking about the insurance benefits from the fire. We did not see any benefit in the past quarter. We continue to work with the insurance companies to close out on the outstanding claims that we have.

What were the damages there that you're seeking? What size can that potentially be?

We're still negotiating with the insurance company. We don't have an amount yet, but I can give you a range. It's probably somewhere in the range of $1.5 million to $3 million.

Your next question comes from Craig Ellis – Carris & Company.

Returning to the Power Management business a little bit, as you look at the mix of that business right now, it seems very PC and wireless centric, but you're talked about a number of new design wins. Can you give us a bit of a time line when you think that the non PC and wireless part of the business would be greater than 50% and is that really the inflection point for when we're going to see gross margins really start to take off in that business?

Let me answer the second one first because the new products that we have out in the hand held and the computing space that are getting designed in, they're not getting designed into necessarily the same systems that were being designed in before or the same sockets like core regulators. They might be peripheral power or they might be feature rich hand held products or something like that. So they will drive gross margin in those segments. But I think in general, as we broaden our power presence I would expect, we are getting traction now, but I would expect by probably this time next year, we'll have a very different make up of our power business that will be significantly different from a comm and industrial as well as computing and consumer products.

I know it's always hard to look into the future with any legal expense, but given the $1.25 million, is there any color you can provide at all in terms of how long we should keep that in the model?

What we've had before, the historical run rate has been about $500,000 a quarter, but last quarter it picked up to about $1 million. Last quarter's numbers were offset by an insurance recovery, but last quarter it picked up to about $1 million and this quarter we are also expecting to be at the $1 million level. It depends on the level of activity. My expectation is hopefully as we go into Q4, Q1, that it will come back down to the normal run rate and we get this thing cleaned up.

Your next question comes from David Wu – Gc Research.

I missed the comment on the Power Discrete business. Is the decline in the second quarter a result of the weakness in the military aerospace and high end medical industrial markets?

Yes. The decline is largely, we have seen softness in the military. We've seen softness in the high end industrial and the high end medical Power Suite business.

I was wondering what level of revenues do you need to see to bring all these temporary cost cutting measures back to normal. In other words, we're at about a $70 million run rate in Q3 and hopefully there's some improvement in Q4 particularly given that it's a 14 week quarter, but I was wondering what revenue levels do you need to bring the OpEx back to normal?

The normalized run rate is about $30 million to $31 million and when we had the level of spending, we've seen revenues in the $75 million to $80 million run rates. So hopefully we can get back to that level pretty quickly. But I think the key point to focus on is that we're going to manage our expenses in relation to what our top line is doing and I think we've done a very good job of that in the past and we'll continue to do that.

If I were to look at the variables and what is going to give your gross margin a lift, I guess it sounded like product mix when we get recovery in industrial markets that's the biggest driver on higher gross margin, right?

It's that plus new power platforms. So even if industrial doesn't come back, let's assume industrial doesn't come back, I'm confident we'll increase our gross margins with our new Power Management platforms in all of our segments so just getting new products out and making sure that we get design win traction off those new products in the multiple markets. Obviously we get more gross margin if the come from industrial and comm versus computing and consumer, but I think even the new power products in consumer and computing are going to drive higher gross margin for us. The same is true of our common sensing platforms. The new comm platforms we have that are getting traction as I mentioned with the record bookings in those areas are very high gross margin for us. I think that will continue to drive gross margin expansion. The more Janus products we get out and the more penetration we get there, I think we'll get gross margin expansion. So we've got a lot of things that could help us expand our gross margins. Obviously if they all come to fruition, then we're going to be in good shape.

There are no other questions. Do you have any closing remarks?

Let me summarize by saying that Q2 of fiscal year 2010 was a very good quarter for Semtech. Revenues increased sequentially by 10% and GAAP earnings per share increased by 50% to $0.12 per share. We were able to generate 26% of revenues in free cash flow and increase our cash balance by $21 million to $291 million or approximately $4.77 per share. Our end market balance and diversified platform portfolio, broad customer penetration and balanced geographical presence enabled us to protect against negative macro forces in the first half and now our new product platforms and our focus on fast growth markets and SAN expansion combined with solid execution will help us to grow in the second half. As overall demand increases, we believe we are very well positioned to take advantage of end market trends such that we will out perform the market and maintain a very resilient profit and cash generation model we have. With that, I would like to thank everyone for participating in our second quarter conference call, and look forward to updating you next quarter. Thank you.