David Pasquale - IR Bruno Guilmart - President and CEO Michael Potter - Corporate VP and CFO

Richard Shannon - Northland Securities Tristan Gerra - Robert W. Baird Bill Dezellum - Tieton Capital Management David Dooley - Steelhead Securities

Good afternoon. My name is Marcello and I will be your conference Operator today. At this time I'd like to welcome everyone to the Lattice Semiconductor fourth quarter 2009 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). As a reminder today's call is being recorded. The playback number for today's call is 706-645-9291. The playback reservation number is 48008347. A replay of this call is also available on the company's website at www.lscc.com. Thank you. I'll now turn the call over to Mr. David Pasquale of Global IR Partners. Sir, you may begin your conference.

Thank you, Operator. Welcome everyone to Lattice Semiconductors Fourth Quarter 2009 results Conference Call. Joining us today from the Company are Mr. Bruno Guilmart the company's President and CEO and Mr. Michael G. Potter Lattice's Corporate Vice President and Chief Financial Officer. Both executives will be available for Q&A after the prepared comments. If you have not yet received a copy of today's results release please e-mail global IR partners using LSCC@globalirpartners.com or you can get a copy of the release off the Investor Relations section of Lattice Semiconductors website. Before we begin the formal remarks, I will review the Safe Harbor statement. It is our intention that this call will comply with the requirements of SEC Regulation FD. This call includes and constitutes the company's official guidance for the first quarter of fiscal 2010. If at any time after this call we communicate any material changes to this guidance, we intend such updates will be done using a public form, such as a press release or publicly announced conference call. The matters that we discuss today other than historical information includes forward-looking statements relating to our future financial performance and other performance expectations. Investors are cautioned that forward-looking statements are neither promises nor guarantees. They involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission, including our fiscal year 2008 Form 10-K filed on March 9 and our quarterly reports on Form 10-Q. The company disclaims any obligation to publicly update or revise any such forward-looking statements to reflect the events or circumstances that occur after this call. Our prepared remarks also will be presented within the requirements of SEC Regulation G regarding Generally Accepted Accounting Principles or GAAP. Some financial information presented by us during this call will be provided on both a GAAP and on a non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance for the results and underlying trends. Management uses non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. If we use any non-GAAP financial measures during this call, you will find that the required presentation of and reconciliation of the most directly comparable GAAP financial measure is in the company's earnings press release. I will now turn the call over to Mr. Bruno Guilmart. Please go ahead sir.

Thank you David and thank you everyone for joining our call today. We're very pleased with the company's progress in 2009. In product care that we have returned the company to profitability. Although this is just the first step towards our goal of sustained and profitable growth it is an important first step. In the last year, we have made considerable progress in our business model and strategy. This increased companywide efforts to materially reduce our cost structure and to streamline and resign our business focus to areas where we can grow and profitably compete. Importantly, with our breakeven point now at around $50 million of revenue per quarter and strong balance sheet, we believe we're well positioned for the future. We entered 2010 with our backlog the strongest it has been in several years. The improvement is due to multiple design wins in virtually all end Markets along with further improvements in the overall business environment. Our sales and marketing teams have also taken a more targeted and aggressive approach at winning new business. This ranges from seeking out new design wins in areas we have traditionally served to working closely with customers to develop new applications such as video surveillance, LED backlighting in flat-panel displays, smart phones and digital cameras. We intend to capitalize on this momentum in 2010 and we will continue to, until we raise the bar higher. As we have made good progress on cost structure and focused business model our attention is now concentrated on continuing to grow revenue. In terms of Q4 revenue was consistent with our updated guidance at $55.1 million and up about 12% from the product quarter. This increase was achieved despite the produced we disclosed expected reduction in revenue of approximately $2 million or 4% due to the final plant step of our efforts to transition some of our distributers from a sell into a sell-through distribution model. As previously stated, these changes were a necessary part of the revamping of our Asia distribution channels as they will improve transparency and visibility of our end customers going forward. Our growth has been broad based played by consistent new product momentum. Our MachXO and new FPGA products continue to gain wider market acceptance with the Fourth Quarter marking another quarter of record revenue. Our power Management products also delivered a record quarter. In addition, ECP3 and Power Manager (inaudible) multiple industrial accolades during the quarter. Overall, we also benefited from continued strength in Asia, particularly in China, but further recovery in our Japan business and a further improvement in the US. Throughout 2009, we build on our already strong foundation in the communications market and expanded into select computing and consumer markets. On the latter, we saw broad based growth in the consumer segment, primarily lead by Asian accounts. Our combination of high value and low power has lead to design wins in smart phones and digital cameras, segments we have not traditionally served. We plan to continue to pursue these opportunities moving forward given the growing acceptance we are seeing of our products in these new applications. Let me now give you some color on the quarter. Revenue in every sector of our business was up in Q4 on a sequential basis. While all life cycle categories experienced quarter-on-quarter growth, revenue for our new products were particularly strong. Mainstream and mature products each posted their third sequential increase as our copy of the business from the mix of new mainstream and mature was 46%, 35% and 19% of revenue respectively in Q4. This compares to new at 41%, mainstream at 38% and mature at 21% in Q3. New showed particular strength being 25%, quarter-on-quarter with 2009 as a whole being up 44% from 2008. Growth in new products was driven by our non-volatile MachXO family our mid range ECP families and our mix signal families. MachXO grew 33% quarter-on-quarter and over 50% for the year. Revenue from our newly introduced ECP3 family more than doubled for the second quarter in the row. Revenue for all mid range ECP families grew over 30% quarter-on-quarter and over 60% for the whole year. Our mix signal families grew for the fourth quarter in a row and we're up over 20% quarter-on-quarter. Revenue from FPGA products represented 30% of total revenue in Q4 up 9.5% from Q3. As anticipated revenue for FPGA products resumed growth this quarter driven by quarter-on-quarter growth in every new FPGA family. PLD products represented 70% of total revenue in Q4, at 13.4% compared to our Q3. Our PLD families were strong across multiple end Markets. On a geographic basis revenue from Asia including Japan was 70% of revenue in Q4 compared to 68% in Q3, with Europe down from 17% in Q3 to 15% in Q4. Revenue from North America came in at 15% unchanged compared to Q3. Overall, on a market basis, communication was 51% of revenue in Q4, down from 54% in Q3 and 57% in Q2, but up in absolute dollar terms from Q3 to Q4. Strong growth by Chinese and Indian customers were offset by more model growth elsewhere in the world. Computing which grew in absolute dollars remained at 17% of total revenue, the same as Q3 primarily driven by momentum in the server market. Industry on average increased to 20% of revenue in Q4 compared to 17% in Q3 and this is a further indication of the breadth of the recovery we experienced in Q4. I will now turn the call over to Michael for a more detailed financial review. Michael?

Thank you, Bruno. As noted earlier, revenue for the fourth quarter was $55.1 million up 12% from the prior quarter and up 10% from the year ago period. Revenue in a full year basis declined 12.5% to $194.4 million from $222.3 million in 2008, the net loss improved to $7 million or $0.06 per share from a net loss of $38.2 million or $0.33 per share in 2008. Gross margin for Q4 came in at 55.3%. This was above our guidance and higher than the gross margin posted in Q3 2009, primarily due to continued strict cost controls combined with the favorable product mix. We also benefited from good overhead absorption as our revenue and production ramped up over the last quarter. Total operating expenses for the third quarter came in at $27.1 million compared to $30.1 million in the third quarter, including approximately $1.2 million and $2.5 million respectively related to restructuring expenses primarily related to our planned and completed moves of operations to Asia. Q4 GAAP net income was 5.6 million or $0.05 per share as compared to the $4.1 million loss or $0.04 per share in the third quarter. On a non-GAAP basis due to the offsetting nature of non-GAAP adjustments, our non-GAAP net income for the fourth quarter of 2009 was also $5.6 million or $0.05 per share compared to non-GAAP net income of $500,000 for the third quarter of 2009 and a non-GAAP net loss of $3.7 million or $0.03 per share for the same quarter a year ago. All per share amounts are on a fully diluted basis. For 2010 we do not plan continue to present non-GAAP financial information. We believe it no longer will be useful to investors. Moving on our balance sheet was further strengthened in the quarter. We generated an additional $45.2 million of cash from operations ending the quarter with the cash, cash equivalents and short-term marketable securities balance of $164.5 million. $30 million of the cash from operations came from the final repayment by Fujitsu of our advance to them. We have an additional balance of $11.5 million in advance credits with Fujitsu which we expect to use over the next six months. The $11.5 million is recorded in other current assets. Not included in the liquidity discussion I just went through is the remaining balance of our auction rate securities with the fair value of $12.9 million. During the quarter, we successfully tendered certain corporate backed auction rate securities which allowed us to achieve a gain of $2.8 million on the sale of these securities, and we believe to reduce the risk profile of our remaining portfolio. Due to the illiquid market for these types of investments, auction rate securities are classified as long-term marketable securities. The auction rate securities market remains weak with auctions that continue to fail and we experience credit downgrades in some of our auction rate security holdings during 2009. Accounts receivable at January 2, 2010, were $33.6 million compared to $28.2 million at the end of the last quarter and days outstanding were 55 days compared to 52 days last quarter and 48 days in Q4 2008. Although our collection times have not materially changed, the DSO metric has been and will continue to be impacted by our transition to higher sell-through transactions which caused higher gross billings. Inventory at January 2, 2010, was $25.9 million down from $27.1 million last quarter and down from $32.7 million at January 3rd, 2009, the end of our 2008 Fiscal Year. Months of inventory now stand at approximately 3.2 months compared to 3.6 months at the end of Q3 2009 and 3.8 months at the end of Q4 2008. Not only did our inventory decline during the quarter but the inventory in our distribution channel also declined. We spent approximately $2.7 million on capital expenditures during the fourth quarter up from $1.9 million in Q3 with the quarterly depreciation expense at $2.5 million down slightly from the prior quarter. I want to highlight several areas to consider when looking at our business in 2010. If you compare our Q4 2009 operating expenses to a more normalized and expected run rate for 2010, several adjustments need to be made. The first is in the area of R&D. R&D expenses will have peaks and valleys during the year driven by the timing of various projects. As I've explained before, Q4 had unusually low mask and project finalization expenses. A more normal run rate would be approximately $1 million higher per quarter with Q1 2010 expected to be at an even higher rate due to higher than normal mask and project expenses. During 2009, as the reflection of business conditions, no management or employee incentive compensation was paid. In 2010, incentive compensation will be earned if financial and performance goals are achieved. Based on the targets established in the plan, this and routine merit increases will total approximately $1 million per quarter in 2010. We plan on tightly controlling headcount in 2010. Most common paid hires would be in lower cost geographies with the cost of total additions kept well below our revenue percentage increase. As such our fixed cost base will remain fairly constant during the year. We will make some selective investments in our low density and mixed signal businesses but the only planned increase in expenses due to higher revenue is in the area of commissions. This includes the financial review portion of the call and now I'll turn things back over to Bruno for the first quarter business outlook. Please go ahead, Bruno.

Thank you, Michael. We're entering 2010 in a solid position and remain confident in our business outlook. We accomplished a great deal in 2009 to focus the company on the areas where we can profitably compete. Our efforts have improved our financial performance. Our goal now is to build on the profitability achieved in Q4. We expect 2010 to be an important year for Lattice. We believe we are positioned to capitalize on gross opportunities from our product families and from our more focused approach in working with customers in existing and new areas. This combined with an improved overall business environment and our ability to dedicate our resources to gross versus restructuring efforts should serve us well in 2010. Additionally, we're also planning to rollout several new products this year. Let me now turn to our expectation. As noted earlier we entered Q1 with a strong backlog, in terms of specific guidance we expect revenue to be sequentially up 8% to 12%. Q1 gross margins are expected to be in the range of 54% to 56%. We'll benefit from higher revenue across our fixed cost base that will be somewhat offset by higher gold prices and costs incurred in setting up our operation center in Singapore. Operating expenses are expected to be approximately $29 million. The majority of the increase from Q4 2009 comes from increased R&D expenses. We expect continued profitability in the first quarter. The above first quarter 2010 outlook is based on current views with respect to operating and market conditions, which are subject to change and the absence of any significant impairment charges related to another and temporary decline in fair value of option rate securities held in long-term marketable securities. In closing, we remain optimistic in our outlook and in our ability to execute on the companies continued growth, cost structure improvement and focus on profitability. This concludes our prepared remarks. Operator we will now be happy to take any questions.

(Operator Instructions). Our first question is from the line of Richard Shannon with Northland Securities. Please go ahead with your question. Richard Shannon - Northland Securities: Hi, guys. Congratulations on the quarter. Nice to see profitability and cash flow, so that's congratulations to you and the team. My first question just on the guidance for the quarter, revenue guidance, as I ask you most every quarter I'd love to have you handicap the growth rates by the specific end markets as you talk about, specially communications and the other ones if you could handicap that for us, please?

I would say that our growth is expected to be broad based similar to the growth that we had from Q3 to Q4. We don't have any individual market that's significantly growing faster than the others in our forecast today. We are seeing good traction and continued interest in our older products and our new products as Bruno mentioned the new FPGA's and our MachXO is doing exceptionally well. Richard Shannon - Northland Securities: Great. Second question is relative to the guidance. What kind of turns requirement do you have to meet the midpoint of the guidance and how have lead times trended and how do you expect them to be in the first quarter?

So our turns requirements are lower for Q1 than they have been in the past. We entered the quarter with a fairly significant backlog. Even if you discount some for the stocking efforts that that some of our new distributers in Asia are going through, we expect to require lower than normal terms to make the midpoint of the guidance and I would say that lead times are okay. They aren't much different than our normal lead times. There's some selected products where it does take a little longer to get parts but for the most part for the products our customers want we're able to hit our normal lead time. Richard Shannon - Northland Securities: Wouldn't say that you have any particular supply constraints then?

You can always find an edge case or an exception of one part or another where there's a problem but for the most part, we're able to get supply to our customers and we believe we have adequate supply in our channel right now. Richard Shannon - Northland Securities: Okay, great. May be kind of a longer term question on growth prospects for the year. Bruno, I'd love to get your thoughts in general where you see your growth coming from either by product or by end markets and if you could specifically refer to some of the areas where you've had some nice design win activity and start the growth in 2009 like for wireless from the server opportunity, consumer laptop and also flat-panel that would be great to hear, please.

Okay, so really the key products for us that are going to generate growth in 2010 are in the ECP family, the ECP3 which is a product we introduced in February of last year which is getting really great traction with all wireless customers and especially in Asia. As you know this product is right now the cost competitive product from a cost power consumption and performance in the market so we expect to see actually very significant revenue growth back from the small days in 2009 in August key wireless market in 2010. The XO product is the next product I would say product where we also anticipate to see significant growth in 2010, so that's really this is classified PLD product but it's really a small FPG architecture and it's a broad base. I would say from an application perspective it serves many, many applications from consumer to computer to communications and I think here we are going to see traction in all these Markets. As you heard, we've seen some new interesting application for this product especially in the flat-panels and also in digital cameras, so we anticipate that now that we have actually a foothold in some of these consumer segments we'll be able to build on that. From a region perspective I think we'll continue to see some strength in Asia while making very good progress in Japan. We had a pretty strong recovery starting in Q3 of last year and we do anticipate that we're going to continue to see some strengths in Japan as well. The U.S. the activity has been picking up lately. It doesn't really show up in the numbers because as you know a lot of the designs that happen in the U.S. are actually booked in Asia by contract manufacturers but actually we're seeing nice recovery in the U.S. from a design win perspective. Europe is still a weak spot for us. We just started to see the first sign of a modest recovery in Europe this quarter. So that's kind of sum the issue on by markets, products and regions. Richard Shannon - Northland Securities: Appreciate the detail there, Bruno. I'll jump out of line, thanks.

Our next question is from the line of Tristan Gerra with Robert W. Baird. Please go ahead with your question. Tristan Gerra - Robert W. Baird: Hi, this is Scott Herlman calling in for Tristan. Thanks for taking our questions. One thing that I wanted to ask on was just there's been some complaints about there not being enough inventory out there in the channel. I wondered if you could give a little more color about what's going on with the distributers in Asia. Are they fully stocked? Your inventory levels I think were at somewhere around a 10-15 quarter low on a day's basis, so I just kind of wanted to get your thoughts on that and I know you said the lead times aren't out too much but is there anything that maybe those Asian distributers are building inventories of that your key OEM customers aren't really taking parts of and so that's not really where an issue would be?

Okay, let me start and maybe Michael can give you more color on the specific numbers for inventory. As you are aware we've been through a premature company overall revamping of our distribution channel in Asia without Japan where we've transformed basically our channel from being a sell-in into a sell-through so in other words its now they are working pretty much like any shipping davit distributer in Europe or in the U.S., and there has been this relationship is fairly new. I mean these distributers have been ordering inventory and we think we have appropriate level of support in these new distributers especially all over Asia so we don't really see a problem of being if you want below safety levels from an inventory perspective. Maybe Michael you want to add-on that.

Yeah, the trend for pretty much every quarter since the beginning of last year has been to sell more out of distribution than we've been selling in but towards the end of the year as we brought on the new distributers and as we did our final transitions in Asia, we've actually been stocking them up a little bit more. That was built into the backlog that they booked with us and was planned so we feel between the inventory we carry on hand which is manly in the form of dye versus finished goods and the inventory our distribution has we have adequate inventory. We certainly carefully monitor it and they are trying to get a little bit of a buffer so that we don't have to expedite quite as much when larger orders and surprise orders come in. Tristan Gerra - Robert W. Baird: Okay and you know you guys are fully through all of the distributer transitions at this point?

Yeah, we're done. Tristan Gerra - Robert W. Baird: Okay, kind of going back to the communications market, are you seeing Phase-IV spend in Q4, what's really pushing the communications in Q4, is it more China 3G or is it just kind of broad based communication strength?

It's obviously Asia, especially China is becoming more and more important for us in terms of overall communication market but again I'm not sure it's a 3G push in China. If you read recently about the two major players in China, is ZTE and Huawei, I mean they've announced significant growth and that growth is coming mostly from the business that you oversee. So I think we are benefiting from that as an overall business so again I think we are going to continue to see very good strengths in that market in 2010 but not really linked to the 3G deployment in China any more but driven by the expansion of this company globally. Tristan Gerra - Robert W. Baird: So you're not seeing specifically lump from Phase-IV coming through in Q1?

The lump we had was in Q1 of 2009 when most other segments were down and that was particularly strong. As you move into 2010, they're obviously continuing to deploy the 3G network in China and we are benefiting from that but compared to the rest of our business it's know where near as significant as it was in Q1 of last year. Tristan Gerra - Robert W. Baird: And you're not expecting a big fall off in that China 3G related revenue in Q2 or Q3?

No, we don't, and as I mentioned earlier a lot of the ECP3s and wins we've been working on last year are with this wireless players in China so we actually expect to continue to see some momentum. Tristan Gerra - Robert W. Baird: Okay, and then distributer as a percent of your revenue is the highest in at least the last 16 quarters. Is that how we should think about your model now going forward? Is that it's pretty evenly based between industry and direct or are you planning on getting that even higher?

I don't think it's evenly based between direct industries. I think distribution is actually slightly higher than our direct business but where there is trench again is in the past we had these sell in distributers in Asia which probably were showing up as direct customers and this obviously is going to change going forward.

So we're selling a lot through distribution but it's going to the end customers through that, so yes, we will have a higher portion of our revenue that's going through distribution but we were selling to distributers before but there was recorded as a direct sale because they didn't have the right of return. Now it's going through distribution, so that's the way the metric is changing. Tristan Gerra - Robert W. Baird: Okay, so it's just an optics change rather than a business?

Yeah, it's an optics change rather than a business model change. Business model is the same as before. It's just that now industries in Asia which accounted in the direct portion will be now distributors. It's actually, comfortable for us to know that some of our distributors are building a little bit of inventory. In Asia in the past when they would do that we would always be concerned that the quarter after when they didn't have that build we would have a fall off in revenue, but now we don't record revenue until they sell to the end customer and what it actually does is position our product well to fit our market place and it gives us the revenue of the real end demand, not peaks and valleys because some distributors are drawing inventory down or building it up. Tristan Gerra - Robert W. Baird: Okay, that's great and one last one and I'll go away. You talked a little bit about the consumer and the TV business. Are you seeing benefit from 3D TV? Kind of heard that a lot of the newer TVs need PLD sitting on their board to be able to actually process a 3D signal. Are you seeing of that this year and how big could that be for a revenue boost for you?

Not yet, we have not seen that yet. The big area of focus for us in 2010 and further is going to be more around mobile consumer applications. Tristan Gerra - Robert W. Baird: Okay, thanks guys.

(Operators Instructions). Our next question is from the line of Bill Dezellum with Tieton Capital Management. Please go ahead with your question.

Thank you, a group of questions here. First of all relative to your design wins with the Smartphone and digital camera, would you please detail kind of those situations and what products that you actually got designed in, and we posed a question because it clearly as you pointed out is a new area for you.

Thank you, a group of questions here. First of all relative to your design wins with the Smartphone and digital camera, would you please detail kind of those situations and what products that you actually got designed in, and we posed a question because it clearly as you pointed out is a new area for you.

So in the case of the digital camera, it's an XO product, and again, it is a steady high end digital camera. In the case of the mobile Smartphone, it's a (4 KZE), okay?

Bruno, would you repeat the Smart phone? I missed what product that was.

Bruno, would you repeat the Smart phone? I missed what product that was.

It's a 4 KZE. It's a low power 4 K which is a PLD that we've had for a while and we've introduced I believe about two years ago, a low power version of that product, but again we do not really disclose further by customers. What I can tell you is going forward as mentioned in my remarks that we're going to introduce a number of new products this year, these products or some of these products are going to be targeted at these mobile consumer markets that we are basically starting to see emerging for at least Lattice.

And this is an indication to us on the outside that you are in fact broadening your focus to the Smartphone and digital camera arena, it's not random chance?

And this is an indication to us on the outside that you are in fact broadening your focus to the Smartphone and digital camera arena, it's not random chance?

We did go and target that type of application, yes.

And not just mobile consumer application, not just restricted to smart phones and digital cameras. We believe that with the new products we have in the pipeline were going to be able to open doors that have not been traditionally served by (inaudible)

Thank you, and then next, the industrial and other segment as you reported actually grew as a percentage of revenues from 17% in Q3 to 20% in Q4 and of course that was on the increased absolute revenues. What caused that increase in that segment, that on the surface sounds pretty boring in industrial and other.

Thank you, and then next, the industrial and other segment as you reported actually grew as a percentage of revenues from 17% in Q3 to 20% in Q4 and of course that was on the increased absolute revenues. What caused that increase in that segment, that on the surface sounds pretty boring in industrial and other.

Yeah, it's not really a single customer. It's fairly broad based and it is not I would say necessarily an area of great focus for us going forward so typically, in the initial market, the PLD, I mean they use mostly PLD devices, a lot of PLD devices and it's just part of this broad base I would say economic recovery with not really a single customer that has driven up the revenue, the growth, the revenue up.

Thank you, and then finally, your cash is approximately one half of your market cap as of today's closing price anyhow. What thoughts do you have about that ratio and implications in terms of how you think about your financial structure and the business?

Thank you, and then finally, your cash is approximately one half of your market cap as of today's closing price anyhow. What thoughts do you have about that ratio and implications in terms of how you think about your financial structure and the business?

So I think in the past and I've talked about this before, we have a fairly high cash balance and it was necessary when we were not profitable to show to our outside customer base that we continue to invest and support them and we weren't in any danger to go away in the short run. As we grow and become profitable, our desire to try and use that cash to accelerate our growth if possible. In terms of my opinion on what percentage of the market cap, to be fair the valuation of the company is based on future prospects and future cash flow and I believe as we've moved in the profitability, people will start looking at the fact that our future is looking better and we should be given a little bit more credit for the value of our business going forward.

From your standpoint, you would rather use the cash to accelerate your growth rather than some of the other financial maneuverings whether that be share buyback, dividend, whatever the case that could be other options?

From your standpoint, you would rather use the cash to accelerate your growth rather than some of the other financial maneuverings whether that be share buyback, dividend, whatever the case that could be other options?

Yeah. We certainly want to keep an adequate cash balance so that if we need to invest in the new technology or new product we do have the resources to do that and if we can't find something that's reasonably priced that looks like a good prospect for us to accelerate our growth, we're very seriously consider other options such as share buyback but at the present time we're concentrating more on growing than on something like a share buyback.

(Operators Instructions). Our next question is from the line of David Dooley with Steelhead Securities. Please go ahead with your question. David Dooley - Steelhead Securities: Congratulations on the return to profitability. I was wondering, you mentioned that your backlog was up I think significantly substantially, can't remember the adjective you used. It is year-end can you tell us what that backlog is now?

We don't disclose that metric and in particular, the number is distorted from where it's been in the past because it's being booked to a large part at full distribution price because it's going to sell-through customers. You have to focus not on the backlog to those distributors but what the end market demand is and that's what we work with and that's the basis for our forecast. David Dooley - Steelhead Securities: You don't have to disclose your backlog once a year in your 10-K or Q?

Not necessarily, no. David Dooley - Steelhead Securities: Okay, what was the level of turns business in Q4 and what is the assumption in Q1? You mentioned that it's going to be down I think everybody said the same thing about down turns in Q1 to make our numbers. I'm just kind of wondering what percentage of revenue the turns were.

Our turns business in Q4 was less than 50% and we expect it to be better than that in Q1. David Dooley - Steelhead Securities: So even further less than 50?

Yes. David Dooley - Steelhead Securities: Okay, great. That's good news. One of the things I noticed is both your larger competitors had their mid quarter updates and then reported their numbers and they seem to have kind of a revenue increase in the last couple of weeks of the quarter. In other words, well another way to say it is typically they experience a decline in the second half of December and that didn't happen this year, it was an increase so there for, that kind of overshot their revenue projections at mid quarter and I was just wondering what you saw at the end of the quarter.

End of our quarter was strong and we expected it to be relatively strong and it was built into our guidance. David Dooley - Steelhead Securities: Okay, and total filings (inaudible) are talking about very strong Telecom business in Q4 and very strong wireless business in Q1 and I'm kind of wondering, I know you're different but is that kind of the pattern you're seeing inside your communications business?

In our communication business, we are seeing a, I would say strong business in wireless because again of the product that we have in our portfolio which are mid-range where the ECP family especially is really targeted primarily targeted for wireless application so while I would say we still have a fairly significant existing wired business just by the nature and the area of focus that we have taken, wireless is our focus and therefore this is an area where we are growing faster than in the wired piece of the communication business. David Dooley - Steelhead Securities: Okay, thank you very much.

(Operators Instructions). At this time there are no further questions. I'll now turn the call back over to management for closing comments.

Okay, thank you, everyone for joining our call today and we look forward to talking to you again next quarter. Thank you, goodbye.

Ladies and Gentlemen, this does conclude today's conference call. We would like to thank you for your participation. You may now disconnect.