Tunç Doluca - President and CEO Kathy Ta - MD, IR Bruce Kiddoo - SVP and CFO

Christopher Danely - JP Morgan Romit Shah - Nomura Securities Blayne Curtis - Barclays Capital James Covello - Goldman Sachs Steven Smigie - Raymond James CJ Muse - ISI Group Aashish Rao - Bank of America Merrill Lynch Craig Hettenbach - Morgan Stanley Christopher Caso - Susquehanna Financial Group Ambrish Srivastava - BMO Capital Markets Evan Wang - Stifel Nicolaus Earl Hege - RBC Capital Markets

Good day, ladies and gentlemen, and welcome to the Maxim Integrated Third Quarter of Fiscal 2014 Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Kathy Ta, Managing Director, Investor Relations. Please go ahead, Kathy.

Thank you, Jonathan, and welcome, everyone, to Maxim Integrated's fiscal third quarter 2014 earnings conference call. With me on the call today are Chief Executive Officer, Tunç Doluca; and Chief Financial Officer, Bruce Kiddoo. During today's call, we will be making some forward-looking statements. In light of the Private Securities Litigation Reform Act, I'd like to remind you that these statements must be considered in conjunction with the cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements in this call involve risks and uncertainty, and that future events may differ materially from the statements made. For additional information, please refer to the company's Securities and Exchange Commission filings, which are posted on our website or available from the company without charge. Now I'll turn the call over to Bruce.

Thanks Kathy. I will review Maxim's third quarter financial results. Revenue for the third quarter was $606 million, down 2% from the second quarter in line with our guidance. Our revenue mix by major market in Q3 was approximately 38% from Consumer, 31% Industrial, 17% Communications and 14% Computing. Our Consumer business declined due to normal seasonality, partially offset by the initial ramp of a new smartphone at our largest customer. Our Industrial business was up strongly, with continued growth in Automotive and signaled strength in our core industrial business. In Automotive, we saw broad-based ramps in infotainment and LED lighting applications. Our Communication business was up, with strength in base stations due to the China 4G LTE rollout and cable infrastructure products. Finally, our Computing business was significantly down as expected, due to our server and notebook business, with server market weakness at major U.S. OEMs and the decline of our notebook business. Maxim's gross margin, excluding special items was 60.1%, down from 61.1% excluding warranty expense in the prior quarter, due to lower fab utilization in Q2 and higher inventory reserves in Q3. Special items in Q3 gross margin were intangible asset amortization and inventory write-up from acquisitions. Operating expenses excluding special items were $222 million, down from $226 million in the prior quarter, due to additional cost synergies from Volterra, and lower spending across double categories, as we continue to tightly control spending. The decline in OpEx matched the decline in revenue. For Volterra, in Q3, we beat our annual synergy target of $15 million. Special items in Q3 operating expenses, included acquisition related and restructuring charges. Q3 GAAP operating income, excluding special items was $142 million or 23% of revenue. Q3 other income, included $17 million in IP licensing income, net of expenses. This was from an ongoing licensing program and was much higher than in prior quarters. We are now able to predict contributions from IP licensing in future quarters, if any. The Q3 GAAP tax rate, excluding special items, was 18.3%, down from 20.3% in the prior quarter. Special items in the Q3 tax rate, included a $35 million credit, related to a more favorable tax treatment for depreciation of fixed assets. GAAP earnings per share excluding special items was $0.43, up from $0.41 in the prior period, excluding warranty expense. Turning to the balance sheet and cash flow; during the quarter, cash flow from operations was $212 million or 35% of revenue. Inventory was 109 days, excluding special items, down slightly from the prior quarter. Inventory in the channel, excluding catalog distributors, decreased from 51 to 49 days, as channel inventory in dollar terms decreased. Net capital additions totaled $25 million in Q3, down from the prior quarter, and at 4% of revenue, below our target of 5% to 7% of revenues. Share repurchases totaled $51 million in Q3, as we bought back 1.7 million shares. We also paid $73 million in dividends to our shareholders. Year-to-date for this fiscal year, we have returned over 100% of free cash flow to shareholders, through dividends and share repurchases. Overall, total cash, cash equivalents and short term investments increased by $81 million in the quarter to $1.23 billion. Moving on to guidance; driven by very strong Q3 bookings, our beginning Q4 backlog increased by $47 million to $413 million. Based on this beginning backlog and expected turns, we forecast Q4 revenue of $635 million to $665 million. Our momentum is broad-based, as we expect sequential revenue growth in every one of our major end markets. Q4 gross margin, excluding special items is estimated at 61% to 63%. Q4 gross margin will benefit from improving fab utilization in Q3 and Q4. Inventory reserves and mix may also impact Q4 gross margin. Special items in Q4 gross margin are estimated at $19 million, primarily for amortization of intangible assets. Q4 operating expenses excluding special items are expected to increase approximately 2% to 3% as our variable employee bonus accrual is up, due to the higher revenue and higher gross margin. It is worth noting OpEx is expected to increase at less than half the rate of revenue growth at the midpoint of our guidance. Special items in Q4 operating expenses are estimated at $4 million to $5 million, primarily for amortization of intangible assets. Our Q4 tax rate, excluding special items is estimated at 18% to 20%. For GAAP earnings per share, excluding special items, we expect a range of $0.45 to $0.49. Net capital expenditures in Q4 are expected to be up from Q3 for test capacity required to support increasing demands, but still within our target of 5% to 7% of revenue. We expect share repurchases in Q4 to be consistent with the prior quarter adjusted for market conditions as appropriate. Finally, our Board of Directors has approved payment of a cash dividend of $0.26 per share, approximately a 3.2% yield at yesterday's closing stock price. I will now turn the call over to Tunç, to further discuss our business. Tunç Doluca: Thank you, Bruce, and good afternoon to everyone on the call. We appreciate your interest in Maxim Integrated and thank you for joining us today. I would like to start off with a brief overview of the analog market landscape, trends that we are observing, and why we believe Maxim is best positioned to take advantage of these trends. Over the years, Maxim has built a robust portfolio of products and capabilities, which offers us a unique industry position, to provide system level integration for our customers. Our experience in serving Mobility customers provided tremendous learning for our organization. We are now seeking the same requirements for simpler system design, lower power, higher performance and more space efficiency in our Automotive, Industrial, Communications and Datacenter markets. The convergence of these requirements is the most significant secular growth driver in the analog industry today. From Infotainment and Automotive applications to Mobile Payment systems and Industrial, customers are increasingly marching to the same drumbeat and drive for integration, as we have with our Mobility customers. In addition, Mobility is still hitting its stride, with increased content in new smartphone platforms, tablets, E-Readers, and a growing category of wearables. With that commentary as a backdrop, let me next provide some color on our major markets, starting with Consumer, as customary. We expect our June quarter Consumer end market revenue to be up strongly, reflecting a full quarter of shipments to our leading customer on their latest generation smartphone. Beyond our leading customer, we are diversifying our exposure within Mobility in several ways. First, we are expanding our technology offerings for mobile devices. Our Mobility portfolio includes power management, optical sensor, MEMS, audio amplifier and touch products. W see opportunities to differentiate in audio and are shipping next generation audio amplifiers to a major customer. Sensors are the largest growth market for us within Mobility, and we are receiving customer poll from new used cases that combine sensors with other technologies. Our high integration power system-on-a-chip remains best in class, and customized versions of this product are being designed and at multiple customers. Second, we are seeing traction in the mid-range smartphone market, particularly in China, and we achieved new power SoC wins in the quarter. We are able to leverage the systems expertise that we develop, for high end smartphones, as mid-range phones become richer in their feature set. Third, we are expanding beyond smartphones, with games and tablets, E-Readers, and wearables. A significant portion of this business is diversified beyond a leading customer. Wearable devices in particular, play to our strengths in highly integrated small form factor and low power solutions. Let me now turn to the Industrial market; I am pleased to note that our March quarter Industrial plus Automotive business was up about 25% from a year ago. We project June quarter industrial revenue to be up strongly, driven primarily by growth in Automotive and favorable seasonality in our core industrial business. We grew our Automotive business for the fifth consecutive quarter. The largest driver of this growth has been in Infotainment, as the Mobility user experience moves to the Automotive market. We are also observing that the number of processors and sensors for car, is increasing, which results in expanded opportunities for us. In the quarter, we experienced broad-based ramps at multiple customers, for infotainment and body electronics applications. Over time, we anticipate additional growth, in areas such as advanced driver assistance safety systems and in hybrid and electric vehicle battery management. Our highly integrated medical products addressed the growing need for affordable low power and biomedical monitoring devices in doctor's offices and in preventive care at home. We achieved several design wins in the quarter, including a high integration portable ultra sound transceiver, and a medical heart rate monitoring device. The key to our success is our ability to integrate low power, secure microcontrollers, with highly accurate analog measurement, and expertise in developing compact, highly efficient power management solutions. In Mobile Payments, we are sampling a new highly integrated system-on-a-chip product, which has been received well by multiple customers, making very small form factor point-of-sale terminals. We are very well positioned for the heightened security requirements for financial terminals, which utilize Chip and PIN smart card architectures. Let me now provide some commentary on our distribution business; we have seen strong end market bookings and resales in North America and Europe for the last two quarters, resulting in 15% and 20% reductions respectively in distributor days of inventory. Globally, days of inventory was 49 days at the end of the March quarter, versus 51 days at the end of the December quarter. Next, let me discuss Communications; I am pleased to note that our March quarter communications business was up over 15% from this time a year ago. In addition, we expect our Communications business to be up again in June, from an already strong March quarter. Our optical, RF and power products are all participating in the 4G LTE infrastructure buildout in China, and we saw strength in our business related to this opportunity. In addition, our cable infrastructure business continues to grow, with the adoption of our advanced data converter products. Overall, we are executing our strategy of delivering highly integrated solutions, which enable broader coverage, increased capacity and lower cost of ownership with the networks and data centers of the future. In the computing market, revenues are expected to be up in June, off a very weak March quarter. I am pleased with our progress in integrating Volterra, and we are excited about the interests our customers have shown in Volterra's high density, efficient power management solutions for the Communications, data center, enterprise server and storage markets. As Bruce mentioned, within our March quarter, we surpassed our financial synergy target for the integration of Volterra. To summarize our view for the June quarter, we expect revenue from the industrial market to strongly increase, led by Automotive applications and seasonally higher core industrial sales. We expect Consumer to be strongly up, with the ramp of new flagship smartphones and more diversified technologies. Communications is expected to be up from a strong March, driven by fiber optic infrastructure buildout and basestation deployment, and computing is expected to be up over a very weak March quarter. In closing, I would like to extend an invitation to each of you, to attend our upcoming Investor Day, which will be held in Boston on Wednesday, May 21. Registration information may be found on our web site, or by contacting our Investor Relations group. At our Investor Day, we will update our long term view of our strategy and competitive position, as well as provide live demonstrations of our latest technology. Kathy, I will now turn the call back to you.

Thanks Tunç. That concludes our prepared remarks, and we would now welcome your questions. In the interest of reaching everyone in the queue, we would ask that you ask just one question with one follow-up. Jonathan, please begin polling for questions.

(Operator Instructions) Our first question comes from the line of Christopher Danely from JP Morgan. Your question please. Christopher Danely - JP Morgan: Hey, thanks guys. So you gave us some very good color on the June quarter, can you just talk about your visibility in the second half of the year, and may be get into the various end markets a little bit. What you are thinking, what we should be thinking? Tunç Doluca: Well our visibility is pretty limited frankly. We have got a pretty good view of the June quarter as I shared. But when you begin to go beyond that, then in most of our markets, its kind of difficult to see what its going to look like. Having said that, if you kind of looked at our two segments, consumer and the rest of our business. The one that's more difficult obviously is Consumer, and in the other space, for us in Industrial, we are seeing channel inventory is not very high. So there is no excess that we are seeing in that, which means that most of the products we are shipping are ending up at customers. So that bodes well for the second half of the year, but as I said, its very difficult to give color, that's more specific than that. Christopher Danely - JP Morgan: Sure. And as my follow-up, I guess just to drill down on the Consumer front. So you are seeing a nice ramp at smartphone this quarter. Last year, we had a nice strong ramp of the smartphone in the same quarter, and then things tailed off a little bit in the second half of the year. Can you just maybe give us a little bit of confidence as to why that should not happen this year, or what the circumstances would be this year versus last year? Tunç Doluca: Well, there is a big difference that we see between last year and this year. Last year, if you recall our largest customer, when they launched their new [indiscernible] platform, they were very bullish and had very high expectations of end consumers' purchases of these phones. So we pretty much ramped up production and they received units for those high numbers, to find out the demand pool from the end market was not as hard. So the difference this year is that we are seeing goals that are -- and the forecast coming from the customer, that are much more moderated, and those levels that we see are more in line with what we think is going to happen, and they are more, I'd say with what we had pretty much last year, ended up happening in terms of the new phone launch. So that's why we don't really expect the big inventory build last year, that eventually resulted in our revenues falling. Christopher Danely - JP Morgan: Great. Thanks a lot. Tunç Doluca: You're welcome.

Thank you. Our next question comes from the line of Romit Shah from Nomura Securities. Your question please. Romit Shah - Nomura Securities: Good afternoon. Thanks so much for letting me ask the question. On Industrial, it looks like your performance is quite a bit better than the supply chain, seeing that Avnet this morning was light on revenues, and then just looking at some of your mixed signal peers like Linear and Xilinx, the Industrial performance is nowhere near as good as what you're showing here in the March quarter. You're guiding for growth again in June. So I was hoping you could just may be provide additional color on why your Industrial and Auto business is performing so much better than the rest of the supply chain. And I guess as a follow-up, is there any concern that, as you go into the second half of the year, that we may see some numerous versions? Tunç Doluca: Okay. So, as you know, and you noted Romit, we do combine Automotive inside of Industrial, and if I were to kind of break what the reasons are, that we are doing pretty well in the market, year-over-year and quarter-over-quarter. Primarily, our Automotive business has been very strong. That obviously is contributing to growth in Industrial. And the reason for that, mainly is because, we have got a product portfolio in some cases that's more diversified than some of our competitors, and there is a strong pool for those products. So we are seeing good growth in Automotive, so that's contributing to that. And in Industrial, if you recall, we've got a product strategy that's got a high integration of component that's more vertical as more core or building block type products, and we are really seeing good growth in both of those year-over-year and I think that that's really helping us with this growth. We were a little bit concerned, whether this was just inventory build at our distributors of the channel. So the data [ph] of inventory says that that's not the case, actually we chose that, especially in distribution in Europe and the U.S., that's gone down significantly, as I said in my commentary, so that's not happening. And we also have looked at some of the bellwether Industrial companies to see whether their revenues are increasing or their forecasting increases, and three or four companies that we looked at, they all are saying they are seeing strong growth in their businesses. So all of that is indicating that there is more activity there. Whether I can answer the question on why we are different than others, that's pretty difficult. On some of them, we have been on different cycles frankly in the past. So just looking at one quarter, its pretty hard to say, but we can kind of tell you about how are doing, its kind of hard for us to tell why that's different from what others are saying. Romit Shah - Nomura Securities: Yeah, its just that 25% year-on-year growth really stands out for this kind of end market. Just lastly, Tunç or Bruce, could you tell us what Automotive is now as a percentage of your business?

So Romit, as you know, we don't break that out, something we are thinking about. But right now, as we have said before, its in the high single digits, and as Tunç indicated, it continues to grow very strongly, both quarter-over-quarter and year-over-year. I think as Tunç indicated, right, it is five consecutive quarters of growth, and so this is one of those markets that, as we get those design wins, that have seasonal strength in the first half of the calendar year. But then those just sort of layer on top and the old ones aren't falling off. So we can -- we see real strong growth in the first half of the year, and more modest growth in the back half of the year. But overall, that has been a very steady and a very strong grower for us. Romit Shah - Nomura Securities: All right. Great quarter. Thank you.

Thanks Romit.

Thank you. Our next question comes from the line of Blayne Curtis from Barclays. Your question please. Blayne Curtis - Barclays Capital: Hey, good afternoon guys. Couple of questions; first, on computing, obviously down much more than the market. Was that just the paring back of products and how did that fare versus your expectations in the quarter? Tunç Doluca: So on the computing side, as I said in my prepared remarks, it was down strongly in the March quarter, and the biggest reason for that was weakness in the two largest OEMs that we saw, and the server market in general, if you followed their announcements, you could see major double digit declines in their businesses. So there is the effect of that for sure on our business, and its -- in this quarter, there is some recovery of that business, but essentially it has been down, because the U.S. OEMs have been weak, in terms of their end market sales. One more thing, we also include notebook in computing, and that also seasonally goes down, plus its an area that both us and before us, Volterra had stopped investing in, so that was expected, going into the future. Blayne Curtis - Barclays Capital: Got you. Thanks. And then on the financial terminals, there is obviously a lot of talk about infrastructure rollout ahead of the U.S. rollout next year. How big is that financial terminal business, if you can break out any rough terms and are you -- where do you see the kind of [indiscernible] infrastructure obviously has to be in place before they roll out any card? Tunç Doluca: So financial terminals percent of revenue is really not that large for us, its in the low single digits. However our technology is very suitable and the dollar content is higher in Chip and PIN type terminals, which as you know is not what's used in the U.S., and there is lot of discussions about when that should get rolled out, because of the several [indiscernible], at the end of last year. But, when that does start to roll out and we don't have the timing yet, frankly, we will be well positioned for it, because our products are very well suited because of our small form factor, as well as our fully certified solutions in terms of security. Our success, we have had in other parts of the world and Europe and China can definitely be translated into the U.S., and that would add to our revenues in the coming years. The exact timing, we can't tell at the moment. Blayne Curtis - Barclays Capital: Thank you, Tunç.

Thank you. Our next question comes from the line of Jim Covello from Goldman Sachs. James Covello - Goldman Sachs: Great guys. Good afternoon. Thanks a lot for taking the question. Just referring back to one of the previous questions, I mean, someone was trying to suggest that you guys are going to have a problem in Industrial and Automotive, because you're growing quickly in the June quarter. Aren't I correct, that you had the fastest growth of any Industrial Automotive analog company in the June quarter of last year, and you didn't have a big decline in that particular segment last year?

I don't know if we were the biggest. We certainly had kind of high double digit, high teens growth last year, and we were able to maintain that level. And again, I think for a couple of reasons, one, the Automotive, kind of -- is strong in the first half of the year, but then it sort of maintains that level in the back half of the year. And then the other thing again, I think as Tunç indicated, inventory levels are very low, right. We are below 50 right now. We are at 49 days; and if you look at Europe and North America, they are also very low. And I guess the final item I would highlight is, when we look at end market bookings, which is sort of the -- are most -- kind of the bookings of the small customers on the distributors. In the Industrial regions, U.S., Europe, Korea, those were all up -- those end market bookings were all up very strongly in the quarter, and so again, that's another leading indicator that we see this kind of continued strength, at least for -- certainly this quarter, and it seems for -- its set up for next quarter as well. James Covello - Goldman Sachs: Thoughtful, thank you. For a follow-up, obviously the market is always going to be concerned about percentage of revenue at any one big customer. Can you just give us, on a qualitative basis, relative to how big your biggest customer might have gotten in prior product cycle ramps. Can you give us any kind of, again, qualitative or a feel for how big it might get in the June quarter as a percentage of total revenue, compared to what it looked like last time? is it close to being the same, is it quite a bit different because of diversification from other segment, somewhere in between?

I think its significantly different. As Tunç indicated last year, in our fiscal third quarter of 2013, our largest customer was very bullish on both their new product ramp and on their existing platform. And certainly that customer spiked in that quarter, I think we publicly said, it went up to over 30%, and therefore for the year. Samsung, we reported in our 10-K, it was around 27% of revenues. I think we have consistently indicated that, today, Samsung is around 20% of revenues. And so that's sort of the relative way [ph] for that. James Covello - Goldman Sachs: Very helpful. Thanks a lot. Good luck.

Thank you. Our next question comes from the line of Steve Smigie from Raymond James. Steven Smigie - Raymond James: Great. Thanks a lot. I was hoping you could talk a little bit more about the diversification you're seeing in the Consumer business. I guess one part of that is, can you talk about for the SoC wins that you mentioned for the Chinese smartphones. Would that be revenue that's ramping at this point, or is that just you have the design wins and that's future revenue, will be one part; and the other part would just be, are there other major platforms out there that you've gained on, that you might ramp on later in the year? Thanks. Tunç Doluca: What I mentioned in my prepared remarks about design wins for our power SoCs, these are wins that are occurring as we speak, so they don't really contribute to revenue until the second half of the year. So that's kind of the color on that one; and your other question was about others, diversification efforts. We have communicated that in the past, but let me repeat what we are doing. We are first of all, trying to diversify technologies beyond power, and I spoke of that a little bit, by winning in optical sensors and motion sensors and MEMS and as well as touch controllers and audio. We are getting design wins in all of these. They are not at levels that are other than the optical sensors at levels that are as high as our power products yet, but we are definitely going in the right direction. We also, in the last year, won a lot of designs in product platforms different from high-end smartphones, so we have won designs now in mid-range phones, we have won designs in tablets and e-readers, and there is this new area of wearables that are coming, so that was our second piece of our diversification strategy. And the third piece, if you recall was to achieve design wins with multiple customers, other than our largest, and in that space, we are making progress as well. You've seen some [indiscernible] that are showing products at our other large Mobility customers, and as I said, I mentioned some of the Chinese wins that we also talked about. So the diversification strategy is doing well on all three fronts. Steven Smigie - Raymond James: Great. Thank you. Then, on the Automotive businesses, could you talk a little bit about the dollar content, or at least the diversity of products that you have in an electric vehicle and hybrid battery management solution and similarly on infotainment application? Tunç Doluca: Well we have, if you look at that key areas that we invested in, and we believe there is going to be long term growth are infotainment applications. And in infotainment, we make regulators of power. We also make tuner ICs for satellites or digital audio broadcast type applications, related to infotainment, but also for safety applications, we have got products that we make for distribution of video content, and this is really to get video from multiple video cameras that are now placed, especially in our high end markets. But it will all migrate to mid-range cars as well. We have great technology in that space to robustly get the information from point A to point B. We have got products for Keyless Go, this is a very robust solution to make sure that we have the secure solution that's lower cost for our customer, but also provides a longer range for keys that are used in Keyless Go. Finally, you asked about hybrid and electric vehicles, we have battery charging and monitoring ICs that go into both -- any car that's got a significant amount of battery in it, whether its hybrid or all electric. And also remember that, these electric cars also use all of these other solutions as well, infotainment, video content distribution, Keyless Go etcetera. One area in Automotive that's providing our success is that we do have a pretty broad range of products for broad applications, which means basically that, since we got into this after many of our competitors, we've got a small share in each one of these, that's why there is potential for us to grow, as we are demonstrating, because we are really starting off of a small base from each and every one of these applications or solutions for our customers. Steven Smigie - Raymond James: Great. Thank you. Tunç Doluca: You're welcome.

Thank you. Our next question comes from the line of CJ Muse from ISI Group.

Hey guys. This is [indiscernible] calling in for CJ, question about your sensors. In terms of proliferating them to customers other than your main customers, is the Android ecosystem incorporating some of these capabilities? Do the manufacturers have to kind of layer it in on their own? Tunç Doluca: Well, can I get some clarification, when you say sensors, are you talking about optical or are you talking about MEMS?

Both. Tunç Doluca: Both, okay. So most of our success so far, just for clarity purposes, has been on the optical side. And on the optical side, it really depends. Some products are going to modules, but then get manufactured by a module maker, and then ends up at the smartphone maker. In some cases, they are installed directly on to the motherboard. So it really depends. But in each case, we really have to provide a good amount of support, application support, to make sure that our products do work in tip top form, and they provide the accuracy and the robustness that our customer requires. So having that ability in handling a customer also helps us in terms of the stickiness of the [indiscernible] eventually when somebody else wants to break in. On the MEMS side, we really -- our success in MEMS so far has been on the Automotive side, in terms of winning projects. As you recall, we reported last year, that we had brought the MEMS technology, brought it up successfully in our own manufacturing facilities, which was a great achievement. We did design our first generation Six Degree of Freedom consumer MEMS product, they fell short on power consumption, although it provided much better accuracy than any of our competitors were able to. So we have now worked on generating our second design, which addresses the power problem, but still provides a great deal of accuracy. So now when we are working directly with the phone makers in order to achieve design wins.

Thank you. Tunç Doluca: Welcome.

Thank you. Our next question comes from the line of Aashish Rao from Bank of America. Aashish Rao - Bank of America Merrill Lynch: Hi. Thanks for taking my question. I have two questions. First one for Tunç, may be I will just follow-up on the sensor question. You've had good revenue growth over the last couple of years, with gesture sensors, heart rate monitors and others. But it looks like several competitors are also coming into the market, soon after you -- and are also competing fairly aggressively on the pricing front. So just wondering, I mean, could you provide some perspective on what's the IP that you have in the sensor business? How protected are you from others doing the same, three, six months down the road, or is this going to be dependent on continually finding the next big sensor thing every year? Tunç Doluca: Well on the optical sensor front, there is obviously heavy competition. These sockets are pretty valuable, just like they are valuable to us, they are valuable to their competitors. So they will go after them. There is -- these products are really not that easy to make frankly. There is -- you not only have to have the process technology to be able to make them, there is a lot of additions for the optical side, and there is also algorithms that one has to really figure out and make them robust, so they work in environments that are quite interesting frankly. So they are barriers to entry in terms of both design, process technology or manufacturing, as well as algorithms. Now having said that, obviously the competitors do put a lot of resources to overcome those. So your assessment is pretty accurate. We have to be coming up with new innovations in this area going forward. But that's the requirement that we hear from our customers. So its not like, this is a stable business, a known solution and generation after generation, all they are asking for, is cost reductions. That's not the environment that we are in right now. The environment is, from our customers and from us frankly, some of these ideas were ours, and we propose them to our customers. We are seeing new needs for sensors to do all kinds of health, fitness, environmental type measurements. So, when I have these discussions with the engineers here, they just have a long list of things that we need to make, and that always is good, because it means you can innovate and you always have a way of staying ahead of your competitors. Aashish Rao - Bank of America Merrill Lynch: Cool. Thanks for that color. Then maybe one more for Bruce, a question more on longer term trends in gross margins. Your June quarter sales guidance is probably going to set a new high. Yet you are operating at the lower half of your target gross margin range of 61% to 64%, and prior years, even at lower sales, you are above 63%, and I was thinking, maybe its mobile and computing, but that's actually a decline as a percent on mix for the last couple of years, so it should also be helping you provide an uplift. Can you just walk us through the puts and takes, is it mix, pricing, foundry, outsourcing or other factors that are pressuring gross margins?

I think as we have discussed previously, the biggest factor affecting our gross margin today, is really utilization. We had our -- our utilization dipped back in the December quarter, it went from 71% to 62% utilization, the fab utilization. And as you know, [indiscernible] had an impact, both in the December quarter, and it carried over into the March quarter as well. In March, it was up a little bit, it got 64% utilization, but when we now look into the June quarter, we are actually seeing its going to be probably be up into the low to mid 70s. And so we are seeing that pick up in utilization. Again, because of kind of the way, you have to kind of count that as the product turns, we don't get the full benefit of that in this quarter. But certainly, to the extent our business continues to grow, and we are able to kind of efficiently load our factories, utilization will go up and that, by itself, should be a tailwind for gross margins. Other things that we always have to deal with of course is, like you've indicated, there is always some level of mix. Inventory reserves in consumer business, where you have kind of large kind of product ramps and declines, has been a challenge over probably the last year. But its really -- utilization is the key driver for that. Its something we are very focused on. We are starting to see those come back up, and that's a positive sign for us. Aashish Rao - Bank of America Merrill Lynch: Thank you.

Thank you. Our next question comes from the line of Craig Hettenbach from Morgan Stanley. Your question please.

Hi guys. This is [indiscernible] calling for Craig. Thanks for taking my question. So going back to computing, like computing had been weak for the last few quarters, just kind of coming up next quarter, due to, like, weakness from the major U.S. OEMs. Could you just comment on any kind of attraction you are seeing with the mega scale data center guys? Tunç Doluca: So, when you say datacenter, you're talking about the enterprise customers, or are you asking about cloud?

I am talking about cloud. Tunç Doluca: Okay. So if you look at most of our current business in the computing market, a lot of it actually is coming from the Volterra acquisition, and much of the business that Volterra had before the acquisition was, more in the enterprise data center market, selling to the two or three large OEMs that you are very familiar with. So that's the reason for the weakness that we've seen. Now going forward, we've really taken that technology and have shown it to the cloud customers, and we are seeing a lot of interest from there, because we are providing great efficiency. We are providing the ability to really lower the total cost of ownership throughout the life of the cloud center or a data center, and we see a lot of interest from them. However, it does take a while for these designs to ramp, and what we have brought into the picture, compared to what Volterra was doing last year, is that we have a sales force that's a lot more effective, because we have more of them. And we also have the name and the cloud of Maxim is a large company, so they can really depend on us and rely on us. So that all is going to resolve us, in us getting more wins in cloud, either servers or cloud storage. But those revenues are not going to show up for a while, so that's pretty much no effect on the current quarter or probably even the current year.

Got it, that's helpful. Going back to the Consumer business, you're prepared to modestly touch upon the traction you're seeing in the mid-end smartphone segment, especially in China. Could you just compare [ph] the dollar content you are seeing there, versus the high end and the overall competitive environment in that space? Tunç Doluca: In that space, let me just kind of describe what we are doing, so that its easier to explain the rest of the story. So essentially what we are doing is, we have several power SoC products that we have developed for high end phones, and what we do is, offer the many, a portfolio of functions that a product like that has, and see how well that fits into mid-range, or even a higher-range phone in the China customers. And in many cases, it fits as it is, but in some cases, it doesn't, which means that we have to change the content of the product. And as soon as you start changing the content of the product, obviously if its lower, which is typically the way it goes, because there are fewer functions in a mid-range phone, the selling prices of product also falls. So it is -- but those are still good opportunities for us, especially because we don't have to spend a lot of R&D to design them, we have already basically spent the money to get all the functions, and it does make sense for us to win these. So the total dollar content for a power SoC, I'd safely say that, what you get out of a mid-range phone, because your functionality is less than what you get in a fully functional power SoC that we would sell to a large high-end phone. But being able to give you exact numbers, obviously we don't want to do it for competitive reasons. But it also depends on each customer, because they are asking for different types of products.

Got it. That's helpful. Congrats once again on a good quarter. Thank you. Tunç Doluca: You're welcome.

Thank you. Our next question comes from the line of Chris Caso from Susquehanna Financial. Your question please. Christopher Caso - Susquehanna Financial Group: Thank you. I have a question on the Consumer business, and given your comments on the more moderate goals this year, particularly in the June quarter, should that imply the seasonal peak for that business should be in the September quarter as it typically is? Obviously, I understand that depends upon sell-through of the phones, but just trying to understand what the expectations are at the moment? Tunç Doluca: So it is, as you know, this market was very hard to predict last year, and this year is really no different. So trying to predict, how many of these are going to be bought by consumers, this quarter and next is very difficult for us to do, and we only have one datapoint to rely on, which is what our customer tells us, that so far, we haven't seen any indication of a change in the forecast that they have provided us. So its very hard to say when the peak is going to occur for these cell phone platforms, from a revenue standpoint for Maxim. Christopher Caso - Susquehanna Financial Group: Okay, that's fair. With respect to lead times, could you give us some visibility as to where the customer requested lead times are, and where your lead times are standing right now, and I guess, as conditions improve, are you seeing any increase in lead times, which may encourage customers to take on some additional inventory in the future? Tunç Doluca: I think this is the first quarter we took that out of [indiscernible]. Bruce, why don't you?

Well sure, and the reason we took it out, is that it has been amazingly flat for about the past year. I mean, if we look at what customers are requesting, its right about nine, nine and a half weeks, it has been right in that range. It only really moves when our mix of business changes. But if we look at sort of the lead time by each one of our, kind of major customer sets at our end markets, it has been very consistent about nine, nine and a half weeks. What we have meant to the customer, is still also pretty consistent around six weeks. We do see, where we were seeing very strong demand. You do see some of our customers, just giving us a little bit more visibility, just to be helpful, until an area is on the Industrial side or Automotive, we see some expenses of lead times there, but again, we think that's really more of just wanting to give us that visibility, and its really in very kind of select markets. Christopher Caso - Susquehanna Financial Group: Great. Thank you.

Thank you. Our next question comes from the line of Ambrish Srivastava from BMO. Ambrish Srivastava - BMO Capital Markets: Hi thank you. Tunç, you guys have done a good job in diversifying your product mix away from traditionally what used to be power SoC S processor, and now going on to, for the full phone and also on the sensor. Is there a way for us to think about the Consumer, as we think through the year, and I understand it depends on the ramps, but what will the consumer mix look like in terms of the product diversification that you guys have been working on? Tunç Doluca: Yeah okay. Let me make sure I understand the question, you're really asking about, within the consumer business, what percentage comes from Power, what comes from sensors and so on, did I get that right? Ambrish Srivastava - BMO Capital Markets: Yeah. And I get some of these things just ramping, but I am thinking more, as we exit the year, versus what used to be traditionally, which used to be mostly power management? Tunç Doluca: I would say that, the majority is still power management. I think that we have added a significant amount of optical sensor revenue in there. But we have been kind of in that order, and then we have got audio products that are coming in, in there. And there is also a slew of building block products, that we don't need to talk about that much, but they are all there, protection chips and authentication ICs and so on. But I really don't know how its going to look like by the end of the year, because of kind of the order of the size. So tower, optical sensing, then probably audio and then other functions add to that [ph].

Just in addition, Tunç talked about sort of the three ways for taking a diversification in your question, and then Tunç has responded around technology and function. Obviously we are [indiscernible] to diversify across platform. We have talked about sort of the mid-range phones, tablets. There is emerging market around wearables, and then finally, that diversification around customers, and again, we have talked some about China. I think overall, we feel good about how we are positioned to continue to further that diversification across the major OEMs. Ambrish Srivastava - BMO Capital Markets: Great. And I am a big believer of your strategy Bruce, but I just wanted to get to some, is there any way to quantify, for instance, on the customer front, you guys have been talking about China becoming a bigger mix, and the evidence is there in the teardowns and what have you. But if there is any way you could quantify, it would be very helpful. Thank you very much.

Thank you.

Operator, we will take the next question please.

Our next question comes from the line of Tore Svanberg from Stifel. Your question please. Evan Wang - Stifel Nicolaus: Hi. This is Evan Wang calling in for Tore. I was wondering, this is just being the second quarter that you mentioned about wearables. I was wondering if you can give a sense of, what this application or this market means to you. Are you ramping at this time, are you in production, how many customers are you delivering the products to in the wearable area, and are these customers the same customers, such as smartphone customers, or do you have to penetrate new customers for this? Tunç Doluca: So let me give some color on that one. Obviously, we do have wins at our largest customer, on some of the wearable products that they have, and actually began to sell. But to us, wearable market means, that its any kind of attachment, wireless attachment to a smartphone or an independent unit that we actually carry around, either on your wrist or by attachment somewhere on your body. So we actually see different applications for wearables, some of them are really in the Consumer space, I'd say more of fitness and health and tracking of some of the body parameters, as well as providing a way to connect, more recently to your phone. So that space is really serviced by the traditional names and is going to come from companies that are already in the Mobility market. But wearables to us also means wearable type products that are used in, I would say, more medical type applications, and that's the one, I also mentioned about units that might be used for monitoring health, to try to diagnose issues, and trying to do that outside of the hospital. So we have design wins that we are going after on both sides, both on the consumer front and on, what I'd call, more of the medical front. So the customer base that we are working with, trying to win designs are on those fronts. So there is some of our traditional Mobility customers, and some of them are actually not, they are more on the medical side of the business. It is not a very well defined market yet. Everybody is going to try to find their way, and what I can tell you is that, we are working with all the big names. So I am trying to get design wins for, in some cases, specialized products for the market, and in some cases, are standard products that we can sell as well. Evan Wang - Stifel Nicolaus: When do you expect revenue for this category to become significant? Tunç Doluca: Yeah that was the other part of your question. We do have revenue today, but its very small compared to the rest of the business, actually, do we break that out Bruce?

We don't break it out. We include it within our consumer business. Tunç Doluca: Yeah, it's included. But I am kind of looking at the numbers that Bruce showed me here. Its kind of in single percent digit type of numbers, so its on the low end. Its very nascent right now. But we believe, and I believe that it is going to be a growth market. We will participate in it, namely because -- if you think about any kind of wearable device that you have, its constrained on size, because nobody wants to wear something that's bulky, which means that its constrained on the battery size, as well on the electronic sized. So it plays very well into our high integration strategy.

Thanks Evan Evan Wang - Stifel Nicolaus: Very good. I have a follow-up question. In the past, you have given some metrics on what percentage of your products are highly integrated products, devices, versus more traditional types of devices or ICs. Can you talk a little bit about the trend that you've seen lately? Tunç Doluca: So the trend that we have seen lately -- I mean, the long range trend, we have spoken about a lot. I mean, back in 2007, it was in the single -- in the teens, in the mid-teens, and today its in the high-40s as a percentage. In the last two or three quarters, it has been hovering the high 40s, so it hasn't really kept going up, and that had something to do with the other parts of the business growing faster maybe, compared to Mobility. Mobility is still two-thirds of our high integration revenue, and the other one-third is in these other markets, Industrial, Medical, Automotive, and Communication type markets. But what we are seeing is, the same trend as I said in my prepared remarks, if customers are really asking for solutions, they make their jobs easier, number one. To make sure that they can take their system and make it either smaller or higher performance or consume less power. Everybody talks about consuming less power, and the best way to do that, is with higher integration solution. So even though today, its two-thirds mobility, one-third in all the others, I firmly believe that that percentage, we are going to see the other one-third growing, in high integration going into the future. But that's kind of the summary. High 40s, two-thirds is mobility, one-third is other markets. Evan Wang - Stifel Nicolaus: Thank you very much. Tunç Doluca: You're welcome.

Thank you. Jonathan, I think we have time for one more question.

Certainly. Our final question comes from the line of Doug Freedman from RBC Capital. Earl Hege - RBC Capital Markets: Hey guys. Thanks for taking the question. Its Earl Hege calling in for Doug. Just quickly on ASP trends, what are you guys seeing both for the overall company and perhaps within each segment, so you know, what kind of ASP content growth opportunity do you guys have going forward there? Thank you. Tunç Doluca: So I assume you're asking about ASPs for the whole company, not in a particular sector. And you know, if you look at our ASPs, its really hard for me to even measure that, in terms of that telling us something about our business. We have ASPs that range from down in the $0.10 range, all the way up to $40, $50. So when there is such a wide variation, it doesn't quite make sense to us to measure what the median is. Now having said that, we haven't read reports probably like you have about ASP declines in analog, and we are very cognizant of that. What we can say is that, because of our high enriched strategy, we have been able to make sure that we got differentiated products that we are selling to our customers, and they are not really provide by a lot of suppliers, which is when usually ASPs fall, and for that reason, we have been able to maintain the gross margin in the window that we targeted for ourselves. So in general, we don't really look at that as some indication, because there is so much variation in the ASP profile of the company. Our focus really is on making sure that we make winning products for the customer. If we do that, we know that we can get paid for all the hard work we do in R&D. Earl Hege - RBC Capital Markets: Great. Thank you; and just a quick follow-up, one of your analog competitors commented that the largest growth markets of AC are going to be Industrial and Auto, as it appears. Do you guys have visibility right now on what that kind of looks like to you? Tunç Doluca: You said, one of our competitors said the largest growth opportunity was in Industrial and Automotive? Earl Hege - RBC Capital Markets: Right. Tunç Doluca: So we -- I mean, where is the largest growth opportunity? It really depends on, which segments of those markets that you pick. But we do, if you look at industry experts, the growth rate for analog, according to marketing companies are in the 4% to 5% range projected for the next few years overall. But if you look at the growth rate projected for industrial, and for the segment of Automotive that we are really investing in, they are pretty much double that rate. So I would say that, that's a pretty high growth rate. The highest growth rate that's projected in all the analog market, still continues to be in mobility, and that's a much higher number than these numbers. So as long as we go and find, the markets, there are subsegments that are growing. I think we will do well as a company, and in industrial and automotive, that's what we have been able to do, and that's why we really demonstrated very large growth rates year-over-year in the March quarter.

Thanks Doug. So Jonathan, I think that was our last question?

Certainly. I now hand the program back to you.

Okay. So this concludes Maxim Integrated's conference call. We would like to thank you for your participation and for your interest in Maxim.

Thank you ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.