Good day, ladies and gentlemen, and welcome to the Vicor 2008 third quarter earnings result conference call. My name is Jerry, and I will be your coordinator for today. At this time, all participants are in a listen-only mode, and we will be facilitating a question and answer session towards the end of this call. (Operator instructions) I would now like to turn the presentation over to your host for today's call, Mr. Jamie Simms, CFO of Vicor Corporation. Please proceed, sir.

Thank you. Good afternoon everyone, and welcome to Vicor's quarterly conference call. I am Jamie Simms, Chief Financial Officer; and with me today is our Chief Executive Officer, Patrizio Vinciarelli, our Chief Accounting Officer, Dick Nagel, and our Treasurer, Mark Glazer. Earlier this afternoon, we issued a press release outlining our financial results for the quarter ended September 30, 2008. The press release is available on the Investor page of our Web site, Vicorpower.com. We also have filed a Form 8-K with the SEC in association with issuing this press release. Before I begin, I remind all of you, today's conference call is being recorded and is the copyrighted property of Vicor Corporation. Any rebroadcast, reproduction or other transmission of this conference call in whole or in part without the prior written consent of Vicor is prohibited. In addition, I also remind you various remarks we may make during this call about future expectations, trends, plans, and prospects for the company and its business constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are denoted by such words as will, would, belief, should, expect, outlook, estimate, plan, anticipate, and similar expressions that look toward future events or performance. These forward-looking statements merely reflect our current beliefs, expectations and estimates, which we share with you during our quarterly conference calls. Forward-looking statements are based on current information that, by its nature, is dynamic and subject to rapid and even abrupt changes. Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected or implied in our statements. Such risks and uncertainties are discussed in today's press release as well as our most recent reports on forms 10-K and 10-Q filed with the SEC. A replay of this conference call will be available beginning shortly upon its conclusion through November 21, by calling 888-286-8010 and using the pass code 63602476. In addition, a webcast replay of the conference will be available on the Investor Relations page of our Web site, beginning shortly upon its conclusion. However, the information provided during the call is accurate only as of the date of the call. Vicor undertakes no obligation to update any of the statements made during this call, and you should not rely upon them after the conclusion of the call. Patrizio and I have each prepared remarks, after which we will take your questions. Patrizio?

Thanks, Jamie. Good afternoon everyone, and welcome to our third quarter conference call. As stated in the afternoon’s press release, despite the weakening global economy, consolidated revenues for the third quarter increased by 7.5% to approximately $51 million, compared to $47.7 million for the third quarter 2007. Sequentially, revenue increased 4% on a quarter over quarter basis from the $49.3 million generated in the second quarter of 2008. On a year to date basis, nine months revenue for 2008 was 8.6% ahead of revenue for the corresponding nine months of 2007. The consolidated book to bill ratio for the third quarter of 2008 expanded to 1.2 to 1.0 as compared to essentially 1 to 1 for the second quarter 2008. Backlog at the end of the third quarter of 2008 was $56.4 million as compared to $46.3 million at the end of the second quarter. As a caution before, our quarterly book to bill ratios and backlog levels are not necessarily accurate predictors of sequential quarterly performance. Nevertheless, we are pleased to have had relatively strong booking for the third quarter, up 24% quarter over quarter sequentially, which contributed to a healthy backlog at the end of the third quarter. Allow me to turn to the third quarter performance and outlook for each of our business units. Revenue from our brick business unit, which represented approximately 90% of consolidated revenue for the third quarter decreased slightly sequentially and over revenue for the third quarter 2007. The brick unit experienced a 32% [ph] increase in orders for the third quarter, but once again, I caution listeners to not interpret this increase as an indicator of sustained revenue growth as some of the bookings contributed to the substantial increase were from certain customers placing single orders in the third quarter for volumes…

Thank you, Patrizio. As Patrizio has addressed both consolidated and unit level revenue, I will focus my remarks on expenses, profitability, and our liquidity. Vicor’s consolidated gross margin was $21.9 million for the third quarter of ‘08, a sequential increase of approximately 4% from the $21.1 million total generated in the second quarter of ‘08. This $21.9 million total was 22% higher than the $17.9 million total generated for the corresponding period a year ago. Gross margin, as a percentage of revenue was 42.7% for the third quarter, representing a 0.10% decrease on a sequential basis from the 42.8% for the second quarter. The third quarter gross margin of 42.7% was well ahead of the 37.5% realized for the third quarter of 2007. As Patrizio stated earlier when speaking to the performance of our individual business units, the brick units gross margin was stable from the second quarter to third quarter reflecting an increase in revenue, an improved mix of higher end products, improved manufacturing yields, and product quality resulting in lower scrap costs and lower warranty costs, as well as the continues efforts to improve manufacturing efficiency. Of note, brick productivity benefited in the third quarter from the full utilization of equipment investments made earlier in the year in our Andover plant. Returning to the consolidated income statement for the quarter, we generated operating income of $399,000, an increase sequentially from second quarter’s operating loss of $765,000. Our operating profit was largely a consequence of the increased revenue for the quarter as many of our operating expenses do not vary meaningfully with sequential changes in revenue. Research and development expense, which is largely associated with our V-I Chip unit, declined 3.5% sequentially from $8.1 million in the second quarter to $7.8 million in the third quarter, which represents less…

(Operator instructions) You have a question from the line of Ron Opel [ph]. Please proceed. Ron Opel – Marston Capital: Yes, Patrizio, earlier this year you commented on anticipated product introductions, scheduled product introductions for VIBricks, including one fairly – one or two fairly major ones that I believe include AC to DC conversion. I wonder if you could comment on the progress of these introductions and related to dine-in [ph] activity.

So we've had some delays with that product development, motivated by achieving certain levels of functionality and performance. The cause of these delays, the scheduled introductions have moved into a timeframe which, at this point, we expect to be early 2009. Ron Opel – Marston Capital: There are no unforeseen difficulties that represent possible roadblocks – serious roadblocks, are there?

No, no roadblocks. They have to do with refining certain functionalities. And we are going through the sequence of steps necessary to achieve closure. Ron Opel – Marston Capital: Does potential customer interest in these products remain high based on what you are seeing?

Yes. There is extremely high interest, both directly and indirectly through our licensee. So we are very focused on this development, both as V-I Chip product and as a VIBrick product, and that was the basis for your question. It is the highest priority project in the business, and it’s getting all the necessary resource of cash, and it is progressing along well. Unfortunately it's taking longer than expected to bring it to fruition. Ron Opel – Marston Capital: Okay. And my second question concerns the order pattern, since the overall order pattern since the beginning of the fourth quarter and particularly in the last few weeks, would you call, would you describe it as a dramatic fall off in the order patter or a more moderate decline?

Well, I think at this time last quarter, when we had the corresponding conference call, I made reference to the fact that as of that time the third quarter bookings outlook look very promising. It turned out to be that way because we were substantially ahead of where we had been of the corresponding time in the second quarter. I think this time around the order pattern in the first month looks softer by a similar percentage in the opposite direction. So, and we believe that’s reflective of what is going on around the world and brakes being applied in various industries with various customers with respect to projects and programs. Ron Opel – Marston Capital: Thank you.

You have a question from the line of John Dillon. Please proceed. John Dillon – JB Associates: Hi, Patrizio. I'm wondering if you can give us a status update on the LCD market.

Well, to some extent, I’ve answered that question earlier in answering Ron Opel's question because that opportunity relates to the AC to DC product that he asked about. So, as indicated a moment ago, there is tremendous interest coming from different sources, directly and indirectly. And the gaining element at this point is shooting closer, which is back to this particular V-I Chip. John Dillon – JB Associates: Will this affect the launch kind of some of the LCD TVs?

Well, as we understand it, we are a factor with respect to win the opportunity in 2009. And based on the discussions [ph] of meeting the latest schedule, this schedule is consistent with being factored into production in the second half of 2009. John Dillon – JB Associates: Okay. You'll still see the introduction as you expected. You expect to be there by the second half of ‘09 with production-type products and production quantities?

That is our current expectation. John Dillon – JB Associates: And do you still expect license revenue this year?

Well, not from that particular source. But, as I mentioned in an earlier phone call, we have been deriving some licensing income. The accounting treatment is such that it doesn't flow into the income statement, but on a diluted basis over a long timeframe just because of how the accounting of it works out. John Dillon – JB Associates: So, this is in a different market then on the LCD?

That’s correct. John Dillon – JB Associates: Can you say what market that’s in?

No. John Dillon – JB Associates: Is there any activity in the gaming market? At one time that seemed to be a target for you guys.

Not at this point in time. John Dillon – JB Associates: Okay. I will get back in the queue. Thank you.

Thank you.

You have a question from the line of Richard Baxter. Please proceed. Richard Baxter – Ardour Capital Investments: Thank you. I would like to just hear some of the visibility that you have into some of your different market with customers, how some are more of a month to month and other ones are more of a contract basis and how those play into your sales? Thank you. Just roughly. I mean, just – and how some customer segments you're able to see farther in, such as maybe industrial or military markets versus consumer.

Yes. So we have markets and applications that afford the greater visibility. And that’s for different reasons. In some cases that's to do with the fact that the programs that have a long gestation period with a high degree of visibility, which is factored to that. In other cases it’s the nature of the products themselves. And that results in high visibility with respect to certain elements of the total mix. As you might imagine, given the current economic environment with respect to other significant elements, there is not the same level of visibility. And let’s say, in a very averse environment, to a different degree, everything can suffer. Even programs where we would like to think there is greater visibility, but take capital equipment as an example, given the current environment, the level of investment the companies are likely to make in capital equipment is bound to be revised. Even in instances we were given the (inaudible) of the capital equipment, would like to think this rationale is different, but exceptions are rare. And generally speaking, we should expect to see a softening demand across many markets. Richard Baxter – Ardour Capital Investments: Thank you.

You have a question from the line of Dick Feldman. Please proceed. Dick Feldman – Monarch Capital: Patrizio, I’ve got two questions. First about the surge in booking in the brick business, you indicated that those orders would extend over a longer than normal period of time. What was the motivation for your customers to do that?

I can't read their minds. I think that the most logical explanation would be that there is certain element of randomness to that. Let’s say, at this time last quarter the trend was very strong in spite of an environment that was already gloomy and deteriorated. We do know that orders that came in – significant orders that came in for bricks in the third quarter were book ahead of their schedule date, because customers ended up placing these orders ahead of when they were expected to place them, I think for reason that I don’t believe we really understand. Dick Feldman – Monarch Capital: The other question I had relates to the AC to DC brick. Does that have immediate applicability outside of the LCD TV market?

Yes. This is a general purpose power capability that was catalyzed by a unique set of requirements in thin flat-panel displays or extra-thin flat-panel displays, I should say. But has broad applicability wherever a very high density, high efficiency, particularly thin power system is needed and given that the world goes around largely in AC power sources, you can envision a lot of different opportunities for these kinds of products, both in consumer markets, industrial markets, and other kind of markets. Dick Feldman – Monarch Capital: But your highest priority would be getting it into the TV market first?

Yes. For reasons that we’ve discussed in the past. So, the product development has been strictly driven from the specifications and unique requirements of the thin large panel display applications that have been targeted in concert with our partner and licensee. But as it happens, that product development isn't only leveraged with those applications. It's really broadly applicable to many other types of applications. And so these are common denominator capability that we intend to leverage to the fullest, both as a V-I Chip capability and as a VIBrick capability. Dick Feldman – Monarch Capital: In past calls you have talked about the potentials in the laptop market. Would this still be a logical market for these products?

For lower-powered versions of that class of product. The original product that we've been developing was targeted for 300 watt, 330 watt capability. In mobile applications, the power requirement is significantly lower than that. But the derivatives of that product that are applicable are lower power levels. Dick Feldman – Monarch Capital: Okay. Thank you.

Thank you.

You have a question from the line of Jim Bartlett. Please proceed. Jim Bartlett – Bartlett Investors: Yes, could you address both the server market and ATE market, what is happening there as well as anything in the military area.

Okay. Well, in the server market, we are seeing progress with – in terms of expanding to fully factorized power system type applications with an early adopter of factorized power, as well as broadening opportunities with other server OEMs. In the test equipment market, there is a great interest in the US, in Japan. As you might know, or I am sure you know the test market nowadays is essentially dead. There is not – in terms of current productivity, much going on given what has been going on with the semiconductor market and given how that test equipment market works as is in effect a derivative of the semiconductor market. So, all of the activities relating to test equipment has to do with new programs, scheduled for future introduction. I think you also asked about the defense market, and the defense market is going relatively strong. Any further questions?

We have a question from the line of Dan Gorman [ph]. Please proceed.

Yes. I was wondering if you could give us an idea of the size of the market that might be available from all companies in the server market. Is it a $20 million or $50 million or what size would you characterize it?

It's much larger than that, but it will take time to develop.

Thank you.

You have a question from the line of John Dillon. Please proceed. John Dillon – JB Associates: Patrizio, I am wondering how the market acceptance for the smaller one-half V-I Chip, how is that chip received in the market?

We have a lot of interest. There hasn't been really a lot of time. But generally speaking, we know from customers that for quite a lot of applications the half-size chip is generally speaking, a better fit to typical requirements. So, the larger chips that are being part of first generation V-I Chip products, typically tend to have a power capability or a current capability that goes beyond the requirements of typical applications. They were developed first for combinational reasons because, first of all, our level of (inaudible) integration as first-generation chips did allow – did not enable a fraction devices. So, we were dependent on fiber completing a second generation chip set to enable the fractional chips, which is now in place. And with that I think there is an expanding set of opportunities with half-size PRMs, half-size BTMs and BCMs. Some of these products had been recently introduced. There is a lot more coming in future months and quarters. John Dillon – JB Associates: With these new fractional-size chips, will they address a much – I mean a substantially higher quantity market and will you be able to be price competitive in that market with those chips?

They expand the market opportunity because they represent a better fit. So case in point, if somebody needed a solution at the point of load at a bigger number, 100 watt, let’s say, 50 amperes and could only choose from a full, big capability at 200 watts or 300 watts and higher current rating than needed for the particular application, you would be in effect, handicapped in two respects; first of all, from a cost perspective, you’d have to pay for a full chip where a half chip would otherwise do. And obviously that’s a significant cost handicap. But also from a performance perspective, you wouldn't be deriving all of the benefits of density and to some extent even efficiency that the half chip enables. So, for applications that tend to be more typical at lower power and current levels, we believe the availability of half chips is going to represent a major step forward in terms of expanding the market reach and the cost effectiveness of factorized power solution. John Dillon – JB Associates: I would think that this – I mean, it sounds to me like then you should be able to get into like lower end server type markets or not quite as high end as you are now, and also possibly some smaller LCD type markets. Is that the target? Is that what you're shooting for those types of things?

We – let’s not get ahead of ourselves. We need to take one step at a time, and it begins with getting the product development done and having products that are qualified and ready to be introduced and once that happens that enable us to take the next set of steps, and I think we're all going to have to be patient with respect to these kinds of cycles and gestation periods. Unfortunately, they are long getting in. The good news is that once they're done they also tend to last for a long time. John Dillon – JB Associates: What about with the stock price so low? Are there any plans for buying back your stock?

Well, as I have commented in the past, we historically have been active. We’ve repurchased well over $100 million worth of stock. You might recall this kind of question being asked of us as recently as three or six months ago with the price of stock usually higher than where it is today. And I'm sure we might have gotten criticized for not acting at that level. Obviously we didn't know what was about to happen in the financial markets and in Main Street. I'm glad that we were cautious and kept our palette dry at that point in time. I am still cautious with respect to what is going on around us. But I think you can expect that at the right point in time, as we’ve done in the past, we are not going to hesitate to get aggressive with respect to buying back stock. John Dillon – JB Associates: Great. Great. One other question. What market was the Picor win in?

Well, Picor strategy is broad based. It’s going after strategic accounts as well as general accounts. And they will obviously take some time to develop because Picor is further behind V-I Chip in terms of its stage of development. So, there again, we will need to be realistic in terms of expectations, and conservative. But, having said that, I have great expectations with respect to the technology product and market opportunity of Picor. John Dillon – JB Associates: Right. But didn't you announce a win for Picor in the –

Yes, Picor has recently achieved a very significant design win that will result in very significant revenues for Picor, about a year, year and a half out. John Dillon – JB Associates: And what market is that in? What market?

It’s in the server market. John Dillon – JB Associates: Great. Great. Thank you, Patrizio. And by the way, congratulations on the bookings. That's awesome.

Thank you.

We have a question from the line of Ron Opel. Please proceed. Ron Opel – Marston Capital: Thank you. In the ATE, automatic test equipment, we know that it's dead at this point, and it’s usually either a plus or a zero. Does that condition apply to not only to orders but also to design-ins or are you seeing continuing design-ins progress in the ATE market?

We are seeing a lot of design-in work. And the strange thing or some peculiar thing relating to the test equipment market is that paradoxically when the level of activity goes down in terms of production volumes for obvious reasons is a time when these companies need to – the ones who can afford it need to invest a lot in new products and new capabilities. So, the designing activity is going on at high pace, while on the other hand the level of business activity is fortunately low. Ron Opel – Marston Capital: And the level of order activity or not in the server market, that's not as – that doesn't have as extreme swings as the ATE market. Does it?

Well, I guess time will tell. But case in point, if buyers of high-end [ph] servers include banks, at some point given what is going on, I wouldn't be surprised if the level of capital equipment investment might be somewhat diminished relative to earlier expectations. Ron Opel – Marston Capital: With respect to Vicor's own capital expenditure pattern, have there been – have you made any changes recently in your budget for either this year or next year?

Not yet. But as suggested in the prepared remarks we are taking a closer and closer look at posturing ourselves all around, particularly when it comes to operating expense levels, to make sure that we are well prepared for what is coming our way. And being conservative about it in terms of the range of scenarios that maybe taking place in the next year or so, without compromising the longer-term opportunity to any degree. Ron Opel – Marston Capital: Right. Thanks very much.

Thank you.

You have a question from the line of Robert Katz. Please proceed. Robert Katz – Senvest: Hi, Patrizio. Congratulations on a good bookings quarter. I have a question, how much of your revenues were turns business versus previous orders that you were shipping into for the quarter?

I don’t think there was any fundamental change in the third quarter. We’ve entered the fourth quarter with somewhat higher fill just because the bookings were stronger in the third quarter. So, we expect to have, in effect, less fill within the fourth quarter than we had in the third. Robert Katz – Senvest: You were mentioning that bookings in the fourth quarter have been trending almost down 20% versus up 20%. Is that right?

Yes, I think, this time last quarter, they were up around 30%. They’ve been down about 20% relative to the third quarter within the month of October. Robert Katz – Senvest: Okay. That doesn't mean – you don't think that would translate into revenues being down 20%. I know you are not giving –

I think, the best expectation for revenues for the fourth quarter would be best characterized as essentially flat. It could be slightly up. Robert Katz – Senvest: Okay. For next year you're more cautious, and which leads me to my next line of questioning. You're roughly a few hundred million dollar company a year in revenues, and kind of thinking around break-even, what can you do to change that, especially in light if your revenues could be trending down in '09 if economic situation –?

I think that there is a two-prong answer to that question. So the first part has to do with getting from 200 to substantially greater number. And obviously we are focused on that. The short term vagaries of the economy notwithstanding, that has to do with the investment in products and new markets and strategic sales opportunities, growing the range of opportunities that we can reach. I believe that there is significant growth opportunity for V-I Chip for the brick business unit in time leveraging V-I Chip inside strategy and for Picor. And that’s obviously the best way to bring about better financial performance by growing the top line substantially. The second component has to do with operating expense limitations. We’ve been running as high as 42%, 43% of top line in terms of revenue expenses with a healthy component of R&D. Obviously the best way to bring operating expense levels down, again, is by growing the top line. But we also suggested in the prepared remarks, we are looking at all other options to contain operating expense levels, particularly now that the environment is potentially is difficult as it might be for a while. Robert Katz – Senvest: Last year you ran your OpEx as low as $18.5 million to $20 million. Are you looking at basically – is there a range you are looking to achieve?

Yes, my target is to get from the low 40s down – first target to something around 30%. And to get there we will probably want to count on a substantial increase in top line. So that will take some time to happen, particularly given the short term outlook in the markets. But part of it is going to be not just top line growth. It's going to be discipline with respect to operating efficiencies. Robert Katz – Senvest: Do you expect your top line to grow in 2009 or especially in the first half of 2009?

Well, it’s hard to make forecasts given the current environment and how abrupt change may be taking place, given the current environment, which is really impossible to forecast. So, because of that it would be foolish of us to stick our neck out with respect to that. Had it not been for what is currently happening, we would have seen a significant step up in the top line in 2009. Given the current environment we will have to just withdraw that expectation and see what happens. And it could come out to be better than one might fear at this point. But it would be risky to ignore what is going on. Robert Katz – Senvest: So, in the short term you are going to take down your OpEx regardless, just be more conservative.

We want to take a very hard look at what options we have to improve our operational efficiencies with respect to reengineering ourselves to advantage. Robert Katz – Senvest: Is there any other opportunities on the gross margin side to get a better mix for, like, the V-I Chip with a higher margin, condition your customer base to better margin shift?

When it comes to V-I Chip, the biggest factor in margins in the short term is going to be volume. After that comes cost reduction with respect to, in particular, the material, the billing material. So as indicated in the prepared remarks, we’d be making progress with respect to getting the cost of V-I Chips down and the team ought to be congratulated with respect to that. I would like to see a greater rate of progress which is purely [ph] dependent on volumes at this point. Robert Katz – Senvest: Okay. Good luck and I’ll be waiting for some of these new opportunities to materialize. We'll just have to wait a few more quarters.

Thank you.

You have a question from the line of Don McKenna. Please proceed. Don McKenna – D.B. McKenna & Company: Patrizio, I wanted to address the R&D issue also and ask what percentage of that expense is in-house versus contracted out?

Well, it’s mostly in-house. Don McKenna – D.B. McKenna & Company: The last time we had a significant down turn, if you don’t mind me saying, you are quite paternalistic about the approach to staffing and going back to even shortened workweeks and alternating times and keeping everybody's benefits afloat waiting for the economy to come back. It sounds like you are taking a bit different approach this time around, is that right?

Well, I guess we should all learn from past experiences. So we obviously want to do what is best for the business and that’s the best thing for not just shareholders, but employees, long term employees in particular. Don McKenna – D.B. McKenna & Company: Thank you.

We have a question from the line of Jim Bartlett. Please proceed. Jim Bartlett – Bartlett Investors: Just to understand the 32% increase in orders in the book business, was that heavily weighted toward VIBricks or what area was that in?

There was one significant VIBrick order, but there were other factors, as suggested in the prepared remarks, including some classic bricks where certain customer orders that had been forecasted to take place in the fourth [ph] quarter, for some reason get moved into the third. And as indicated earlier, we don’t have enough visibility to tell what’s behind that. The best guess would be that for some reason the program got moved in. That happens from time to time. But it would be dangerous to read too much into it, particularly given what is going on around us. Jim Bartlett – Bartlett Investors: And what is the outlook for VIBrick in 2009?

There's positive developments in terms of an expanding several opportunities. I think that the major area of opportunity is in expanding VIBrick offerings to provide a more package options that leverage in particular half chip, more functionalities, both in terms of point-of-load devices and AC to DC solutions. Jim Bartlett – Bartlett Investors: And those AC to DC solutions should be available in early ‘09?

Yes. Those are the ones that as I answered in – as a comment in answer to an earlier question, were unfortunately delayed because of a V-I Chip development slip. But we believe we are making good progress and that we are converging on a product that meets all the requirements and we expect that we will be able to bring that to fruition in the first quarter of ‘09. Jim Bartlett – Bartlett Investors: And if you did, what is the lag time between orders on that product?

Well, it depends on what kind of application. So, as suggested earlier, there are opportunities in flat panel displays in second half of ‘09. There are other kinds of opportunities with different gestation periods. Jim Bartlett – Bartlett Investors: Thank you.

Showing no further questions at this time.

Thank you. Talk to you in few months.