Good morning. My name is Philis and I will be your conference operator today. At this time, I would like to welcome everyone to the Vishay's Third Quarter 2007 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. I would now like to turn the call over to Rick Grubb; Vishay's Chief Financial Officer. You may begin your conference.

Thank you. Thank you for calling in for today's conference call. On line with me today are Dr. Gerald Paul, Vishay's Chief Executive Officer; Dr. Felix Zandman, Vishay's Executive Chairman and Chief Technical and Business Development Officer. Before I start, Bill Clancy, Vishay's Senior Vice President and Corporate Controller will read our customary opening statement.

You should be aware that on today's conference call, we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. For a discussion of factors that could cause results to differ, please see today's press release and Vishay's Form 10-K and Form 10-Q filings with the SEC.

Thank you. As usual, I will make some summary comments and Dr. Paul will add a more detailed evaluation on the results for the quarter and finally Dr. Zandman will update our research and development and acquisition activities. As announced in today's press release, Vishay reported $0.25 operating earnings per share as compared to $0.27 for last year's third quarter and $0.26 for the second quarter of 2007. The operational results of the third quarter 2007 and for the last six months of 2007 exclude the automotive business unit acquired as part of International Rectifiers PCS Business. Company announced its intention to sell this business unit in June and is in the process of meeting interested parties. The reported GAAP earnings per share include restructuring and severance cost of $9.9 million. This item and its related tax consequences plus an additional tax benefits pertains in foreign tax rates at a negative $0.05 per share effect against operating earnings. In addition, this quarter earnings were negatively affected by foreign exchange charge of $2.5 million. Revenues for the third quarter of $730 million were approximately 11% higher than last year's third quarter, 2% higher then the second quarter of 2007. Increase in revenues compared to last year's third quarter is primarily due to International Rectifiers PCS acquisition in April of this year. Revenues by segment were: semiconductors 55% of the total revenues, assets 45% in the total revenue. Consolidated gross margin for the quarter were 24% as compared to 24.9% for the immediately preceding quarter. Gross margins by segment for the quarter were as: semiconductors 23.3 compared to 24.1 in the last quarter, assets 24.8% compared to 25.7% in the last quarter. As I said before Dr. Paul would discuss the operating results in much more detail. Selling, general and administrative expenses…

Thank you, Dick. Good morning everybody. I think quarter three was another solid quarter for Vishay. Earnings per share were at $0.25 per share and we were close to street expectations. Our free cash flow remain strong, we achieved a $84 million and our acquisition, our IR acquisition continued to contribute to the rest of the results. Let me talk first about the business environment. I think that general skepticism for the quarter was not justified. Q3 showed the continuation of the friendly business climate that exists since the end of 2005. Asia in quarter three was strong beyond pure seasonality. Europe on the other hand was seasonally weak. There was strong business at distribution. The POS was above the prior quarter and above the prior year. Inventory turns of our distributors improved to 4.1, Americas at 3.0, Europe at 3.8 and especially Asia improving these days turns 5.9. Relatively moderate price pressure continues to exist despite the lead times being normal in general. We've seen a strong upturn in notebooks and in mobile phones beyond seasonality. Industrial and automotive segments are stable on a high level. Let me talk about Vishay's business development in quarter three. We were in line with our guidance. We achieved sales of $730 million in the quarter as compared to $716 million in prior quarter and $654 million last year. The IR acquisition excluding the automotive systems part of it contributed $59 million, which was also in line with our expectations. Without acquisitions and without the exchange effects, sales are constant versus prior year. But the orders are up by 6%, which makes us optimistic for the time to come. Book-to-bill was at 0.98, which includes some backlog corrections for the IR product line. Some details of the book-to-bill ratio; 0.93 for distribution, 1.03…

Good morning. I am Felix Zandman Executive Chairman and Chief Technical and Business Development Officer. The quarter produced $84 million free cash. Free cash is for what for Vishay said one of the key focus points. We always emphasize that. Our earnings per share was $0.01 or so below market expectation. If it were not for substantial quite substantial inventory reduction, our earnings per share would have somewhat exceeded market expectations. Integration, processes for our businesses which we have recently acquired continues or continue on plan, IR and PM Onboard are proceeding properly. Our R&D programs are on target and I would like to mention now about one program. Just wanted to mention that about the introduction of our new product line, PM Onboard, our new acquisition. PM has developed sensors for our new way of weighing the cargo transported by vans and trucks. The sensors and its software optimize loading of a truck. And a truck which is overloaded pays heavy fines and when under loaded is expensive to operate. The market potential to outfit new trucks and retrofit old ones is into hundreds of millions of dollars per year. During the Birmingham show in U.K., it was a show for commercial vehicles, General Motors, Volkswagen, Renault and others, truck manufacturers and producers and major truck fleet operators showed a high interest. Small orders and quotes are underway. Fifty better sites to prove product reliability show excellent results. The official product release will be next month, this is but one of their R&D projects which are under way. We continue to investigate small and large acquisitions as in the past to broaden our product portfolio and introduce advanced technologies in our line of business namely called passive components, discrete semiconductors, infrared components and weighing sensors. They look with bit confidence on the immediate and long range future objective. Thank you and we are open for questions. Well you are open for questions. What is it?

Well Philis. Question And Answer

Yes. [Operator Instructions]. Your first question comes from the line of Jim Suva.

Great, thank you very much. Can we come back to the gross margin issue? I believe last quarter you had mentioned that you expected gross margins to improve or re-bounce somewhat. And I know you had mentioned that there were some inventory adjustments on your end this quarter. But I believe inventory corrections for the most part within Vishay is kind of under your control. So kind of help us triangulate around really what happened this quarter to profitability as sales are going up and margins are going down?

Okay. Well we did not guide for gross margin actually. And it was clear that we would continue to reduce inventory. In fact it's a target of the year to generate a strong cash flow, which we are doing. As it relates to the inventory reduction, you understand a reduction like that doesn't impact on the P&L which we show and Dr. Zandman pointed out without this impact we would have exceeded the street expectation. In the fourth quarter, we will stop to reduce the inventory of... to reduce the inventory in different finished goods and we will continue to reduce on the other hand the inventory and raw materials. We also had in Siliconix a negative shift of the product mix, which contributed to the negative gross margin development vis-à-vis the prior quarter. But mostly it came from the inventory reduction.

Okay, thank you.

Your next question comes from the line of Matt Sheerin.

Yes, thank you. It's Thomas Weisel Partners. Just a follow up on Jim's question on the margins, Siliconix gross margin was I guess the lowest number in three years. I know you talked about mix, you talked about inventory. Could you be more specific about the mix issue there and how you see that playing out in the next couple of quarters?

Well, we had... there was a replacement of sales volume to the handsets by volume for the desktops which was at lower variable margins. We are working on cost reduction quite heavily and we see a normalization of the mix going forward, but it will not come overnight. But we work heavily on the cost reductions.

Okay. Because you not too long ago, gross margins were in the 30% range. I mean is that?

It was 28% to 30%.

Okay. And I mean do you see... do you think you can get there sometime in '08 back there with Siliconix?

I think we will have a very strong cost reduction next year.

Okay. And then on the distribution book-to-bill seemed pretty low. What are you seeing from your distribution customers in terms of their strategy concerning inventories and are you expecting I mean normally you see strong distribution sales in the first quarter of the year. Are you talking to distributors about re-stocking inventories at any point in the next couple of quarters?

In our numbers for the distribution, we have included an inventory correction as a permanent drop of inventories for IR. As I reported last time, when we took on the IR acquisition the inventories at for IR products at distribution were very high from the beginning and now we see a constant decrease in normalization of this inventories. Of course this is reflected in our book-to-bill for distribution. Overall, the business and this is I think what counts. With the business of our distributors is very strong. Their POS continues on a high level and we expect no decline there.

Okay. And if... so where was the distribution book-to-bill within passive then? Was that higher than the overall number?

Passives was higher I've said it before and let me just see, was 1.02... in distribution you mean?

Yes.

I do not have this break down here. Yes, it was for sure. Yes it was.

Okay. Thank you.

Your next question comes from the line of Thomas Dinges.

Hi, good morning guys. Dr. Paul I wanted to follow up just on two quick comments that you had made. You did say that notebooks and phones were better than what you would have expected in normal seasonal.

Yes.

And then you said that industrial and auto was stable at a higher level? And you had previously also said that Europe was down just sort of seasonally, nothing other than seasonal and may be just some distribution realignments in the numbers geographically there?

I see only in Europe, we only have seen the seasonal impact. The environment continues strong.

Okay. And then just one last quick one is, if you look at the Siliconix overall the book-to-bill there being a little bit less than one. If you adjusted for those backlog corrections at the business --

It would have been slightly above one.

It would be slightly above one?

Yes.

Okay, thank you. That was my question.

Thank you.

Your next question comes from the line of Kevin Kessel.

Great, thank you.

Hi Kevin.

My question is in terms of the PCS acquisition, I think that you guys are still looking to bring that to about $11 million operating profit quarterly?

That is true.

And that is that still on target for I think its March quarter, March '08?

Well we still have the same target, but it may take somewhat longer because we found to separate manufacturing from IR. It will take more time than we thought and this is a major portion of the improvements going forward.

And can you help us understand what you mean by take longer than you thought?

Something like six to 12 months.

Okay. So you thought it would be done by in --?

We said it would have been in the second quarter next year if I remind and now we would say 6 to 12 depending how it goes a month later.

Later than the second quarter.

Yes.

So, some either.

It goes successively also step-by-step. But this separation from IR manufacturing is represents quite an effort, which is underway.

Of course. All right okay. So, how much I mean what... if that was going to happen as still pass the March quarter, I mean how much of that was... how much of additional improvement did that represent getting fully separated from manufacturing?

Now, I think manufacturing going forward represents still at least half of the remaining improvement.

Half of it, okay. And then in terms of the just the overall top line, you do essentially $730 million in September and when you look at the outlook at the mid point 720, what is exactly driving the sequential decline even though slight, what is driving it?

Now, it's the end of the year and we have a new business, IR we may be somewhat conservative can be, but this is our best opinion.

Okay. Thank you very much.

Thank you.

Your next question comes from the line of Steven Fox.

Hi, good morning. Can you talk a little bit more of the pricing pressures? I am a little confused here, it sounds like you saw a little bit more pricing pressure than you are expecting. But at the same time, the other metrics I would look at seem fairly stable. So, could we dig into why you saw the pricing again?

I mean on the passives, I don't have to argue, it's 0.4% versus prior quarter and 0.7% versus prior year, sometimes its little positive, sometimes a little negative. I think it doesn't contradict the statement that passives more or less as we say see no price decline. On the actives indeed, it's slightly increased but only slightly vis-à-vis prior year it's 4.5%. It's still on the lower side definitely. Historically, it's on the lower side. It was 2% versus prior quarter. I would not over interpret it. It's sometimes a little more, sometimes a little less, so I would not see at this point an increase of the pricing pressure.

Okay. And then when you look at Siliconix, can you just update us on any kind of expansion plans year-to-date?

We will continue to expand. We will continue to expand volume by 15% going for the next year... in the course of next year. So we expect to grow accordingly.

How much is volume increase this year at Siliconix?

Its 20% roughly 20%.

And just to be queried, expansion underway into next year's mix still basically back end December?

Its both back end and then front end both.

Great. Thank you.

Thank You.

[Operator Instructions]. Your next question comes from the line of Andrew Huang.

Hi good morning. Can you hear me okay?

Yes sure.

I was just wondering if you could talk a little bit about your revenue guidance in relation to some of the other discrete companies we've heard from so far and some of the passive side. Generally, they have been thinking about revenues up in the range of 2% sequential and year to guidance a bit of down 1% sequential.

It's our best estimate it's the year end. We have new acquisition on board and we want I think we may have been a little conservative, but that is the projection.

Great.And I know you wouldn't like to give guidance on the quarter. But I was just wondering if you could just give us just kind of a general outlook for '08. For the full year would you expect the year to be up or down?

We see no signs. And I can only talk of what I see, which doesn't mean that I know the future. I see no signs on the market that the economy should slowdown, and Vishay is going to participate properly at this economy. I think we can expect another good year 2008, given the situation as we see it today.

Thanks very much.

Thank you.

Your next question comes from the line of Shawn Harrison.

Hi. Just firstly, a point of clarification, you mentioned operating expenses would hold at the current level going forward. Is that the percentage of sales, or in dollar amount?

Well, we expect more of less the same sales. So it is the same thing. For the next quarter, we are guiding to practically... to practically the same sales level. We are managing it not to the percent of sales; we are managing it to the absolute number.

Okay. That helps. So, secondly, just going back to Siliconix, you mentioned you had backfilled some demand with desktop related products, negatively impacting the mix. With the handset demand coming back, shouldn't that positively impact gross margins going forward for you?

Yes, it will for sure. It will, but it doesn't go overnight. So it will be a... we forecast for next quarter an improvement in Siliconix gross margin. But it goes step by step, and it's a combination of recovering product mix and cost reduction going forward.

Okay. My third question just has to deal with incremental restructuring actions. You mentioned you had a good or solid plan for cost removal heading into '08. I was wondering if there was any update to the $50 million program that you've spoken of, that you are currently implementing.

The manufacturing... all our restructuring efforts are on plan, absolutely on plan. We just advanced, I wonder whether I got across properly, we just advanced the last major manufacturing restructuring program by nine months. We wanted to announce in the closing of non-linear resistors in Belgium in the course of 90, of 2... sorry, of 2008. But, we came to the conclusion that we could be faster. It's an effective project with a payback of 1.2, 1.3 years. And we just decided it to announce it now. This is the... for given the present structure of Vishay. But talking about future acquisitions, this is the last major manufacturing project we see.

Okay. So, no further major manufacturing relocations?

No.

Okay. My final question, just inventory reductions, it sounds like they may slow to an extent in the fourth quarter, but as we look into '08 what should we expect in terms of inventory reductions on the raw material side. Should it be at a reducing pace or at similar pace?

On the raw material side, we want to go down approximately at the same pace, approximately for... I would say three quarters of the year. You know what happens. We correct our high inventory of tantalum powder and wire. And we can foresee this reduction to continue at approximately the same rate for the main part of next year. But this doesn't impact the P&L.

Okay. It's mainly... it's on... going forward it's on tantalum powder versus --

Tantalum and a few other programs, but I must admit tantalum is the biggest part of it.

Okay. Thank you very much.

Thank you.

Your next question comes from the line of Steve Smigie.

Great, thank you. My first question of firstly, I just want to... I appreciate the gross margin guidance. That's really helpful. Second, I was wondering if you could talk a little bit about any plans you have for any potential capital structure changes, given the convertible debt in cash any changes coming up.

Yes. As you all know, we have this $500 million bond, convertible bond that 2023 is maturity date. But they do have a put day available in August of '08 and we are addressing that situation right now. Someway tweaking that bond to make it last little bit longer and do away with put.

Okay, thank you. And could you... if you just state again what the gross margin was on the capacitors, or excuse me the resistors?

18% and the resistors were 28.

It seems like there has been some drop here recently across a number of your categories in terms of gross margin. And I was just hoping if you could talk a little bit about, and it just seems that there is a pretty decent potential for recovery there. I am just trying to hope you help me understand, was there sort of step function jump, a couple of quarters out may be. When could we expect to see that recover? It seems like just a lot of potential there. I was trying to ask you about --?

On resistors, 28% is on the low side for our margin potential. If you go back during to the recent quarter say, four or five quarters, you will see resistors would be more on the 30% gross margin. But it's a certain swing which is primarily due to product mix. It's of course always it's not constant. Secondly, the quarter was definitely burdened also there by inventory reduction which was our plan, which was our plan, which was our plan. So you... we expect and I said it in the presentation, we expect already in quarter four an improvement of the gross margin in the resistors back to more normal levels, because for instance, the inventory reduction will discontinue. On capacitors, it's the same thing. There is a spread. You may know we come from very low gross margins in capacitors. And we have recovered to a range between 17% and 21%. This time it came out at 18%. We see potential there to improve especially as we see a good development. I also tried to say it at some power applications, given power applications, which grow fast.

How much the impact on the Siliconix gross margin was from including IR revenue in there?

IR was close to the average.

IR was close to the average, okay. And just in general, you mentioned that the environment you viewed as friendly. I was hoping you could talk a little bit about what makes you consider the environment friendly and what you would... what signs you might see in the economy that might make you say, hey, things are slowing down or becoming unfriendly?

They are qualitative and quantitative things. Quantitative for sure is the inventory turns of our distributors. 45% or 40% to 45% of our business is with distribution. And of course seeing their POS strong and seeing their inventory turns high gives confidence. And then of course we talk to customers. So overall, the response from the market does not indicate a downturn.

Okay. And are you seeing anything different say in the U.S. where may be you have some weakness in housing that might affect the consumer versus other international markets, is there any sort of dramatic difference?

At least nothing I can see from our responses and our numbers as a matter of fact. I don't see. If they achieve, if they turn... the gross national product goes down everywhere dramatically, this of course will also reflect... be reflected in our industry. But this is from me nothing tangible at this point. It's not in our responses, nor in our orders, nor... I cannot see it at this point.

Okay, great. Thank you very much.

Thank you.

[Operator Instructions]. Your next question comes from the line of Shawn Harrison.

Hi. Just two quick follow ups. The decline in other income sequentially, how should we look at that going forward? I know this quarter was FX related.

We expect the interest income to be about the same as running about at $4 million positive this quarter.

Okay.

The FX for this quarter as I indicated is, for the first six months we've had zero effect on FX, and for this quarter we had a $2.5 million negative charge, mainly due to the shekel-dollar relationship, and this is something that's unusual. But we don't expect that to continue into the fourth quarter.

Okay. And then just a point of clarification, I want to make sure that I had this correct. You are trying to eliminate the put on that $500 million convert and potentially change that into a longer term, just strictly debt instrument.

No. It would continue to be a convertible. However, we have announced back in I believe June of this year that when... if the put takes place or when the particular maturity comes, we would be selling that in cash anyway. We would not be using share. So, it becomes almost like a debt instruments anyway. But besides pushing the put back there, we will have to do some tweaking of the call features from some other devices.

Okay. I just wanted to make sure that you want to replacing that with another debt instrument.

No.

Okay. Thank you.

At this time, there are no further questions. Are there any closing remarks?

Yes. Thank you very much. And I would like to thank everybody for calling in today. That officially ends our call for this quarter. We expect in late January to be reporting on the year, and I look forward to talking to everybody there again. Thank you.

This concludes today's Vishay's third quarter 2007 earnings results conference call. You may now disconnect.