Good afternoon. My name is Ellie and I will be your conference operator today. At this time, I would like to welcome everyone to the Tessera second quarter 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) Thank you. Ms. Shilton, you may begin your conference.

Thank you, Ellie, and good afternoon, everyone. Thank you for joining us for the Tessera Technologies second quarter 2009 earnings conference call. This call is being broadcast live over the Internet. A webcast replay will be available at tessera.com for 90 days after the call. In addition, a telephone replay of this call will be made available for two business days beginning approximately two hours after the completion of this call. To listen to the replay in the U.S., please dial 800-642-1687 and internationally dial 706-645-9291. The access code is 19462142. I will now read a short Safe Harbor statement. During the course of this conference call management will make a number of forward-looking statements, which are statements regarding future events including the future financial performance of the company. These forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ significantly from those projected. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this call. More information about factors and that may cause results to differ from the projections made in these forward-looking statements can be found in Tessera’s filings with the Securities and Exchange Commission including it’s annual report on Form 10-K for the year ended December 31st, 2008 and its quarterly report on Form 10-Q for the period ended March 31st, 2009, especially in the sections of these filings entitled Risk Factors. The company disclaims any obligations to publicly update or revise any forward-looking statements to reflect events or circumstances that occur after this call. On the call today from management are Hank Nothhaft, Tessera’s President and Chief Executive Officer; Mike Anthofer, Chief Financial Officer; and Barney Cassidy, General Counsel. During this call today, management will discuss certain non-GAAP financial measures for comparison purposes only and they will be using non-GAAP numbers in their prepared remarks. The non-GAAP amounts of cost of revenues; research and development; selling, general and administrative expenses; net income and earnings per share do not include the following. Stock-based compensation, acquired intangibles, amortization charges, charges for acquired in-process research and development, and related tax effects. Management believes that non-GAAP amounts provide a more meaningful comparison measure of quarter-over-quarter and year-over-year financial performance. Please refer to the company’s second quarter 2009 earnings press release and to the company’s website for a reconciliation of non-GAAP measures to GAAP. After management's opening remarks, we will open the call to your questions. So that management is able to respond to as many of you as possible, please restrict yourself to an opening and a follow-on question. Please re-enter the queue if you have additional questions. And with that, I will turn the call over to Hank.

Thank you, Moriah. Greetings to all of you. Thank you for your interest in Tessera. Coincidentally, this is my one-year anniversary as CEO of Tessera. We will discuss our second quarter 2009 results, recent developments, and then open the call for your questions. Total revenue for the second quarter of 2009 was $62.3 million, slightly above the raised guidance we gave on June 2nd. Combined and controlled spending during the quarter, we had favorable GAAP EPS and non-GAAP EPS results. In our micro-electronics business, we generated $55.6 million of total revenue during the second quarter of 2009, 100% of which was royalties and license fees including a license fee and options fees from Motorola who became a licensee in the second quarter. Although the macroeconomic outlook remains uncertain, we did see some encouraging trends during the quarter in our served markets of computing and wireless mobile devices. In the DRAM market, the decline in chip demand appeared to bottom out as both OEMs and the channel became comfortable with inventory levels. As a result, we believe DRAM vendors experienced an increase in orders towards the end of the second quarter. Demand in the overall mobile device market appears to have reached it nadir and will begin to improve in the second half. Because we recognize revenue one quarter in arrears, any positive impact we receive from increased orders in either DRAM or wireless would be felt starting in our third quarter. Turning to the research and development side of our micro-electronics business, we continued to make progress on multiple fronts in the second quarter. Within the context of our controlled spending, we have reallocated resources and continue to invest in strategic micro-electronics programs including silent air cooling and micro-PILR. In silent air cooling, we continue to address the remaining engineering…

Thank you, Hank. We generated excellent results for the second quarter. Our total revenue was $62.3 million, up 11% year-over-year. Micro-electronics royalties and license fees were $55.6 million, up 13% year-over-year including license and option fees from Motorola. As a reminder, we had a settlement from Amkor in the first quarter of $64.1 million, of which $60.6 million with micro-electronics revenue and $3.5 million with interest income. This distorts the quarter-over-quarter comparisons. However, excluding the Amkor settlement, we were up 21% over the prior quarter. Second quarter of 2009 imaging and optics revenue was $6.6 million. Royalties and license fees were $4.2 million, up 209% year-over-year, however, down 20% quarter-over-quarter. One-time license fees currently make up a significant portion of our imaging and optics royalties and license fee line item and as such, can make the quarterly revenue lumpy. Imaging and optics products and services revenue was $2.4 million, down 57% year-over-year and 11% quarter-over-quarter, largely due to the slowdown in the semiconductor equipment purchases, which negatively impacted our lithography business and weakness in the communications sector related to high-end routers that use our micro-optics high-end lenses. Total GAAP operating expenses were $43.6 million and are broken out as follows. Cost of revenue, $3.9 million; R&D, $16.9 million; SG&A, $17.3 million; and litigation expense of $5.5 million. Our litigation expense was much lower than the prior quarter, largely due to our decision to terminate the Subcon ITC case in March, which the ITC subsequently dismissed on July 19th. As a result of the reduced litigation expense, second quarter total GAAP expenses were 7% lower than the prior quarter and 19% below the second quarter of 2008. Excluding litigation expense, GAAP operating expenses were down sequentially just under one-half percent and up only 3% year-over-year. Stock-based compensation expense was $7.2 million…

Thanks, Mike. Before I open the call for questions and answers, I want to discuss our intellectual property protection efforts including the significant progress we made in the second quarter of 2009. On May 20th, the U.S. International Trade Commission ruled in a final determination that our assorted patents in the Wireless ITC action are valid and infringed. The ITC issued a Limited Exclusion Order and Ceased and Desist Orders under which the Wireless ITC action respondents including Qualcomm, Freescale and Spansion are not permitted to import or sell infringing products in the United States. I want to stress that the ITC orders affect only unlicensed companies that are trying to maintain an unfair competitive advantage against their licensed competitors. We have spent hundreds of millions of dollars in research and development to bring our innovative technologies to market. Most of the world's largest semiconductor companies have licensed and incorporated our technologies to the benefit of their customers and shareholders. The list of Tessera licensees now includes Motorola who signed a license with us in June. The other respondents in the Wireless ITC action have followed a different approach and in July, filed appeals with the Court of Appeals for the Federal Circuit. We and the ITC have submitted our position to a stay during the appeal and now await the Federal Circuit's ruling. In the interim, the respondents are not permitted to import or sell infringing products into the U.S. even under bond. Hardly one of these respondents appears at times to value innovation and intellectual property as we do and in fact participates in the alliance Tessera co-founded to fight for innovators' rights. Different playing fields can apparently drive different public positions on these important questions. With regard to our other enforcement efforts, the date of the initial…

(Operator instructions) Your first question comes from CJ Muse of Barclays Capital. CJ Muse – Barclays Capital: Thank you for taking my question, Hank and Mike. I guess first question, you talked about Toshiba's stance on starting to ramp in late 2009 and I guess a – two-part question to this. One, can you give some sort of context to what kind of magnitude we could see versus the current run rate? And then I guess second part of the question there is, are you close to signing up additional customers for that product as well?

CJ, this is Hank and thank you for your question. So the imaging and optics division had a very good quarter and we are very satisfied and optimistic about the potential and certainly we are very enthusiastic about hitting our $100 million goal in 2011, but it is very much like doing a startup in a – within a public company. And because the division is rather small and as Mike said in his comments, we are going to experience lumpy results based on contract wins, one-time license fees as we build the royalty stream. So we have won a number of important engagements with the potential manufacturers that I mentioned in the script and we do expect those royalties to ramp as handsets that include that technology start to ship, but I really don't and can't put a context of magnitude on it. It is a very active market and we are engaged in bidding on and pursuing a number of new projects at this time. So we feel we are right on schedule and very confident about the future of the division. CJ Muse – Barclays Capital: Sounds good. And if I could, I guess, make my follow-up question, considering the advantage I guess Amkor has relative to some of the other non-licensee (inaudible), can you talk about whether or not you've had conversations there, whether you think despite the ITC Subcon case being dismissed that they could actually come back and become licensees?

CJ, I'm not sure I – I understood kind of what you said, but I’m not sure what your specific question was. CJ Muse – Barclays Capital: Well, the question – I mean, Amkor is a licensee, ASE still or not, do you see a situation where they could come in given the competitive advantage that Amkor enjoys?

I think I better refer that question to Barney Cassidy, our General Counsel.

Hi, CJ. We are obviously interested in more licensees. We are in discussions with Amkor, we don't agree with their current position. I think Hank was pretty clear about that in the call. And it's very hard to predict what future licensees we may obtain. CJ Muse – Barclays Capital: All right. Thank you.

Your next question comes from Raj Seth of Cowen and Company. Raj Seth – Cowen and Company: Hi, thanks. A couple of quick ones. Mike, am I correct in assuming that in your guidance for the following quarter that you have included the Motorola or anticipated recurring contribution from Motorola because I thought there was some uncertainty around whether or not you'd have the necessary audit reports?

We have an estimate and it is included in the guidance. Raj Seth – Cowen and Company: Okay. Hank, you talked about the optics business and referenced why it's a little bit difficult at this stage to predict revenues perhaps next year. I'm curious when do you expect your wafer-level camera to be hitting the market? When will we start seeing that in phones? Obviously, some of the smart optics stuff probably comes sooner from Samsung and from Toshiba. When will the wafer-level stacks hit, do you think?

Raj, thank you for the question. So as you know, we have both design-in IP and infrastructure IP. So as far as a design-in IP goes, we've won a number of programs in those areas and that technology is in units that are moving to market as we speak. In terms of the wafer-level camera and wafer-level optics, which fits into the IP infrastructure bucket, we expect to see that in the beginning of the year. Raj Seth – Cowen and Company: Okay, good. One last one if I might. You mentioned a $9 million purchase of some IP during in the quarter. Could you comment on what it is you are buying and then maybe comment on uses of cash, cash balance keeps growing here, how are you thinking about deployment of cash?

Okay, Raj. I'm going to ask Mike to handle that question.

Yes. So Raj, the acquisitions we made in the quarter were primarily around patents, additional patents. We have the Dblur Asset acquisition in addition to acquiring some patents and we had the balance of an earn-out on a previous acquisition. So in total, on aggregate, that was approximately $9 million. Raj Seth – Cowen and Company: And with regard to sort of uses of cash going forward, you used to have a buyback in place. I'm sure you are looking for more acquisitions. How should we think about – to date, you've only done very small acquisitions, again on the cash balances getting close to $400 million. How are you thinking about what to do there?

Raj, thanks for the question on the use of cash. So as you said, it is clear that we got intent at this point in time to initiate a major stock buyback. We are very active in surveying the market and looking for acquisitions of companies and/or intellectual property that fits into our strategic purpose and business model. And so, that would be my intended use of the cash. We certainly would be willing to do a larger transaction if we found something that made sense. Clearly, to date we have not found such a transaction. Raj Seth – Cowen and Company: Thank you.

Your next question comes from the line of Kevin Vassily of Pacific Crest Securities. Kevin Vassily – Pacific Crest Securities: Yes, hi. A couple of questions. First, I think on your last earnings call you mentioned that Nokia was shipping one or two handsets that incorporated enhanced depth of field technology. Do you have an update on that number right now? Is that going up from what you guys can tell?

Yes, it has. It's our – keeping score at our end, we believe seven handsets at the moment including the two that I mentioned on the previous call. Kevin Vassily – Pacific Crest Securities: Okay. As you kind of look out in the second half of the year as you obviously get into a period of the year where there are a number of product releases. Do you guys expect that number to go up? Do you have any visibility to that?

Well, I don’t have a precise visibility, but I know it's a very desired feature and it's being incorporated in a lot of additional handset programs and we do anticipate more handsets in the market by the end of the year. And then in addition to that, we are bidding on a lot of the additional opportunities. And then extended depth of field, itself turns out that it does provide that feature. We are trying to come up with a better name than extended depth of field because it has so many other capabilities besides just providing a focusing capability. So for example, in manufacturing it increases the yield of the sensors in a manufacturing application. It's the basis of an ultrafast lens for low lighting situations, provides a lower F-stop and the like. Just as we decided to incorporate it as a feature or a capability and the wafer-level 3 megapixel program that we are – we announced or talked about in today's script. So it's a pretty exciting capability and it's being well received by the market. And in summary, yes, we do expect many additional handset models to be in the market using that technology by year-end. Kevin Vassily – Pacific Crest Securities: Okay. A question on Amkor. Just want to make sure, you are not applying because they – I think you've characterized them as not being a licensee, if I heard that in the prepared remarks.

I said not a licensee in good standing. Kevin Vassily – Pacific Crest Securities: Good standing? Okay. You are not implying that they are not paying at all. You are just implying that the – their audit does not true up to kind of what you think incorporates your technology. Is that the right way to think about it?

Yes, that's exactly the way to think about it. Kevin Vassily – Pacific Crest Securities: Okay. So just one kind of last follow-up around that. One of the respondents in the ITC Wireless case – I think you actually referenced Amkor and this issue around being not in good standing saying that there is no liability on their part, this is an issue between Tessera and Amkor. As it pertains to the kind of legal ramifications of the ITC decision, do you think that's a correct statement on that respondent's part? I mean, how do you guys view they are not compliant relative to a respondent who would have using them as a sub-contract packager?

Kevin, thank you for the question. I will refer this to Barney Cassidy, our General Counsel.

Kevin, we don't agree with that characterization. We believe that the ITC order, which is an order of the federal government is broad and includes all products being imported on behalf of the respondents that infringe our technology and that a partial payment by a licensee on components does not satisfy that order and we anticipate that there maybe a public dispute about this in the near term that will adjudicated in one of a variety of forums. Kevin Vassily – Pacific Crest Securities: When you say a variety of forums, can you go there in more detail? Is this part of the appeal process that they are undergoing right now or –?

I don’t think it would be part of the appeal process. I think it would be either in arbitration or in direct litigation against one or two parties. Kevin Vassily – Pacific Crest Securities: All right, okay. Any – when you say near term, do you have any time frame around that?

I do not. Kevin Vassily – Pacific Crest Securities: Okay. All right, thank you.

You are welcome.

Your next question comes from Krish Sankar of Bank of America. Paul Thomas – Bank of America: Good afternoon, this is Paul Thomas for Krish Sankar. Thanks for taking my question. Just looking at the micro-electronics revenues in Q2, if we take out roughly $12 million or so in one-time payments, mostly from Motorola, that’s roughly the amount you raised guidance by in June. It looks like the underlying business was down maybe mid-single digits. Is that the right way to think about it?

I'll refer your call, Paul, to Mike.

Yes. No, I'm not sure where you get those numbers, Paul. I wouldn’t agree with that. I think the underlying business is actually going to be up slightly. Paul Thomas – Bank of America: No, I’m talking about – in Q2, the $12.5 million was kind of the midpoint that you raised the guidance from in June. So was that – that's obviously not all one-time payments. I'm just looking for any sense of the breakout between what was the underlying units based business versus what was the one-time payment.

Yes, in the second quarter? Paul Thomas – Bank of America: Yes, in the second quarter.

Well, in the second quarter there was not – they were not ongoing, if you will, or royalty payments under the license. Those commence with this third quarter. So in the second quarter, there were – there was a continued payment for an option fee and then a license fee. So they are one-time charges.

Paul, this is Hank. They weren’t – you shouldn’t conclude that all the increase in our guidance was from Motorola because it was not. Paul Thomas – Bank of America: Okay. That's what I'm trying to figure out. So how should we think about that growth mix? Is it just – is it, I mean a little bit Motorola, is it the majority for Motorola?

I don't think we are going to answer that question. Paul Thomas – Bank of America: Okay, thank you.

It's all right.

Your next question is from CJ Muse of Barclays Capital. CJ Muse – Barclays Capital: Yes, hi, a quick follow-up to Kevin's question, I guess, regarding Amkor. What are your alternatives that you have there with the licensee that you feel is not in good standing? Is that something that would automatically go to arbitration or as you pointed out, direct litigation is also an alternative?

CJ, I'll refer this call – your question, follow-up question to Barney Cassidy.

Hi, CJ. This is a topic that I have to be very careful about because it obviously involves potential litigation. We have a variety of alternatives. The preferable one would be a negotiated resolution, but we do have besides that alternative several public forums in which this dispute could be adjudicated and I think I want to stop there. CJ Muse – Barclays Capital: Okay. And then I guess another on the 3 megapixel wafer-level camera that you talked about announcing last week. So can you provide a little more color there in terms of your anticipated cost advantage, the roadmap, as to how you expect to get designed in with customers and what could the opportunity look like when the opportunity unfolds?

So – just to make sure I understand your question, CJ, it's what is our cost advantage compared to traditional camera module? CJ Muse – Barclays Capital: Yes.

And then, what do we see the opportunity like as it unfolds? Okay. So I would say we would estimate that the cost advantage would be around 30% relative to the camera modules. We will be sampling the product in the fourth quarter. That would imply availability to license and have licensees in production in the first half of next year. And as you well know and maybe some of the audience are not as familiar that the – we believe that the VGA market will sustain itself for quite sometime at high volumes due to the requirement for two cameras on phones, one for video and one for digital still camera. We believe that the 3 megapixel is somewhat the sweet spot of the high volume market for digital still cameras on wireless devices at this time. And so, we think that a large percentage of the market will likely migrate to wafer-level technology not only for the cost advantages, but due to size and reliability and other benefits. CJ Muse – Barclays Capital: Very helpful. And I guess one last question for Mike. Tax rate came in at 40%. I think you guided the book rate in – for Q1 around 46% I think for the full year. What should we be thinking about the second half of ’09 –?

I think the full year rate should be around 45%-ish. We have the benefit of an R&D tax credit in the second quarter and a few other discrete items. But for the year, we are looking at about 45% for the full year and so, you can make your estimates for third and fourth quarter accordingly, based on first half actuals.

And CJ, Hank again. One other thing I wanted to mention is I think you and I have talked about, this is the VGA, it's reflow compatible to one step manufacturing process. Of course, 3 megapixel brings that as well. So I didn’t want to miss that. It saves so much money in a one-pass manufacturing process. And as we have said, the VGA is probably a 300 million to 450 million unit market during the next few years. Certainly 3 megapixel is looking to be a 200 million to 300 million unit market in the foreseeable future. CJ Muse – Barclays Capital: Perfect. Thank you.

You are welcome.

(Operator instructions) Your next question is from Daniel Gelbtuch of Roaring Brook Capital. Daniel Gelbtuch – Roaring Brook Capital: Thank you and congratulations.

Thank you, Dan. Daniel Gelbtuch – Roaring Brook Capital: With regard to the wireless litigation, is there any way to timetable what you are up to as far as how long you think appeals process is going to last before you can get – how long do you think it's going to take to shake it all out?

Yes, I'll let Barney answer that.

Daniel, the Federal Circuit does not have the same statutory framework underlying it as the ITC does. So they don't – they are not driven by strict deadlines. So it's really hard to say. I think an average is six to 18 months to hear a – and resolve an appellate question. And our case may move more quickly than that or less quickly than that. Daniel Gelbtuch – Roaring Brook Capital: And then just switching gears to the wafer-level camera, is there any other solution that's out there in the market you find yourself competing against just module guys that are entrenched and just trying to drive down price or is it – do you see anyone else near on the market – in the marketplace that's trying to develop this?

Yes, that's a really good question. And Dan, I don’t – I really haven’t seen anything directly competitive as you said. The camera module guys will try to remain competitive by dropping prices, but as far as an alternative technology, we haven't seen anything yet. Daniel Gelbtuch – Roaring Brook Capital: And you are basically marketing this more to the sensor manufacturer or is it – or was this in your marketing OEM, handset OEM or is it all flows [ph] into the module guys?

Good question, Dan. Thank you for the question. So we market the wafer level sensor packaging technology and the wafer-level optics technology, which can be combined to create a wafer-level camera. Generally, the people who you would characterize as sensor packaging people, those are the people that have licensed to date. It's not to say that a sensor manufacturer would decide to bring it in house and what have you, but to date that's been more of a – I would call them sensor packaging service bureaus for lack of a better team have been the people who have been signing up for these technologies. Daniel Gelbtuch – Roaring Brook Capital: All right. Thank you very much.

You are welcome.

Your next question is from Michael Cohen of MDC Financial Research. Michael Cohen – MDC Financial Research: This question would either be for Hank or Barney. If the respondents in the ITC Wireless investigation evade the Limited Exclusion Order by having only their customers ship product into the United States, could you seek an enforcement proceeding with the commission and could a General Exclusion Order possibly issue from such a proceeding?

Michael, I'm going to defer that question to Barney.

Michael, it's hard to say what we would do. Certainly, going back to the ITC for an additional enforcement proceeding is an option. I'm not at all sure we would pursue that, it depends on the circumstances and how things evolve. It's very difficult to go into litigation tactics on a call like this. Michael Cohen – MDC Financial Research: Okay.

We don't have any current plans do that if that's of help. Michael Cohen – MDC Financial Research: Are you aware of any precedent where an enforcement proceeding has kind upped the limited or a LEO to a GEO?

None of the (inaudible) I have. No. Michael Cohen – MDC Financial Research: Okay.

The only other thing I would say – and this is Hank, that we did ask for a GEO in the DRAM case. So I remind everyone of that. And the date on that, I think I said in my script, was August 28th for the initial determination. Michael Cohen – MDC Financial Research: Okay. And my follow-up question is now that the 649 investigation against the subcontractors has been withdrawn, could you talk about your strategy to still get licensing revenues from those former respondents.

Michael, we can’t comment on that. Thank you. Michael Cohen – MDC Financial Research: Okay. Well, thank you very much.

Your next question is from Greg Eisen of ICM Asset Management. Greg Eisen – ICM Asset Management: Thanks, good afternoon. I wanted to follow-up on your revenue recognition regarding your license fee – your royalties from Amkor. Specifically, they made that one-time payment to you and then they went into non-compliance. Could you first tell us – post making the one-time payment to you, that $64 million payment, how long was it before they started to show evidence of being in non-compliance with the intent of your license agreement?

Go ahead, Barney.

So -- hi, this is Barney. So the way the license agreement works is they give us a royalty report and then later follow-up with royalties over the period and it was in comparing the royalty report and the actual payments and our further reflection on what the meaning of the royalty report was that we came to the conclusion they were not in full compliance and we engaged in dialog with them. So payments have occurred, I want to be clear about that, but we do not believe the payments are full payments and we do not believe they are in compliance with the license at this time. Greg Eisen – ICM Asset Management: Okay. Let me ask the question in another way. Since they give you a royalty report, do you believe that they did not report sufficient royalties based upon their level of business activity or do – or was it that you accept the royalty report, but then the payment doesn’t meet the definition that the royalty report would imply what they should be paying?

Yes, I think these are details that we are not going to discuss on a public conference call. Greg Eisen – ICM Asset Management: Okay. I'll ask one more question then. Just simply in terms of your revenue recognition, are you recognizing as revenue just what they are sending you as payment and nothing more or are you accruing for revenues that they have not agreed to pay you?

Okay. Greg, thanks for the question, this is Mike. Now our revenue recognition policy is very tight. We only recognize revenue based on royalty report and the matching cash receipt. So we are only taking revenue on what is being reported and paid by them. I want to be very clear on that regard. Greg Eisen – ICM Asset Management: Great. That answers my question. Thank you very much.

You are welcome.

(Operator instructions) And you have a question from the line of Hans Mosesmann of Raymond James. Hans Mosesmann – Raymond James: Thanks. Just a clarification. Is the timing of the Amkor situation and not becoming a guy [ph] in good favor or good standing, is that the timing coincident with the Qualcomm situation in terms of the litigation that they have with you?

I don't think we are going to answer that question. Hans Mosesmann – Raymond James: Okay, thank you.

You are welcome.

I'm showing no further questions at this time, sir. Do you have any further comments?

So, thank you very much and I appreciate your interest in the company and look forward to our next call in about three months from now.

That does conclude today's conference. You may now disconnect.