David Pasquale – IR, Global IR Partners Darin Billerbeck – President and CEO Michael Potter – VP and CFO

Richard Shannon – Northland Capital Sundeep Bajikar – Morgan Stanley

Good afternoon. My name is Morgan and I will be your conference operator today. At this time, I would like to welcome everyone to the Lattice Semiconductor fourth quarter 2010 conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. (Operator Instructions) Thank you. I’d now like to turn the call over to our host, Mr. David Pasquale. Sir, you may begin your conference.

Thank you, operator. Welcome everyone to Lattice Semiconductor’s fourth quarter 2010 results conference call. Joining us from the company today are Mr. Darin G. Billerbeck the Company’s President and CEO, Mr. Michael G. Potter Lattice’s Corporate Vice President and CFO. 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 email Global IR Partners using LSCC@GlobalIRPartners.com or you can get a copy of the release off of the investor relations sections of Lattice Semiconductor’s website. Before we begin the formal remarks I will review the Safe Harbor statements. It is our intention that this call will comply with the requirements of FCC Regulation FD. This call includes and constitutes the company’s official guidance for the first quarter of fiscal 2011. If at any time after this call we communicate any material changes to this guide, we intend that such updates will be done using a public forum such as a press release or a 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 within our fillings with the Securities and Exchange Commission including our fiscal year 2009 Form 10K filed on March 10 and our quarterly reports on Form 10Q. The company disclaims any obligation to publicly update or revise any such forward-looking statements to reflect events or circumstances that occur after this call. Our prepared remarks also will be presented within the requirements of FCC Reg G regarding Generally Accepted Accounting Principles or GAAP. I would like to now turn the call over to Mr. Darin Billerbeck. Please go ahead, sir.

Thank you, David, and thanks to everyone for joining us on our call today. This is my first quarter since joining Lattice as President and CEO. I’m excited to be part of the Lattice team and look forward to the challenge of profitably growing our company. One of the most frequent questions I get asked has to do with my observation since joining Lattice. My response is I’m highly impressed with the people not just those in the U.S. but our workforce globally. Additionally, I’m impressed by our overall market line up including the recently launched MachXO2 family. Last but not least I’m pleased by the previous changes we made to our distribution network that will create more sales opportunities. Lattice is clearly well positioned for the next 12 to 18 months in the low density PLD and mid range FPGA markets. We have a strong line up of low cost, low power and high convenience products that is evidenced by the early wins from our non-volatile MachXO2 and broad acceptance of our mid range LatticeECP3 an area where we will see upside and we will focus on is improving the efficiency of our R&D processes. This is not an issue of spending more on R&D but getting more out of the money we spend for Lattice it’s about delivering solutions defined as a combination of the right software and hardware (inaudible) customers on budget and on schedule. Another thing that we have learned working at large companies and small innovation companies is that one size does not fit all when it comes to companywide processes and systems. At Lattice we will balance a laser focus on where we win follow it up with time of decisions, crisp executive and no bureaucracy. In terms of specific results for the fourth quarter revenue of $73.1 million was down 5% from $77.1 million in Q3 2010, while up 33% from $55.1 million in Q4 of 2009. Gross margin came in at 62.7% compared to 59.1% in Q3 2010 and 55.3% in Q4 2009. The fourth quarter was in line with guidance as strength in the consumer industrial and other end markets was offset by the weakness in communications market. As some customers suggest that there is short-term inventory. Our turns in Q4 2010 came in as expected on a dollar basis with higher than expected contributions from mature products. Turns in non-communication areas including industrial and some military also come in as expected. As noted in our release revenue and margin benefited from higher sequential sales in a mature product category. This segment has more recently had several strong quarters of growth with the exception being Q3 and is reasonable to expect further fluctuation in mature products as mature products typically decline over the long run. Let me now give you some additional color on the quarter. The revenue mix of new mainstream and mature was 43%, 30% and 27% of revenue respectively in Q4. This compares to new at 46% mainstream at 32% and mature at 22% in Q3. While new products were down 10% quarter on quarter on a full year basis they grew 91% outpacing the company’s overall growth of 53%. The growth in our new products was driven by our mid ranged LatticeECP3 FPGA’s and our non-volatile LatticeXP2 and MachXO families which grew over 90% and 88% respectively on a full year basis. During the quarter, we shipped our 50 million MachXO devices the MachXO family is seeing wide spread adoption across all of our markets and is our largest product family by revenue. In November, we announced our non-volatile MachXO2 family MachXO2 extends the value proposition of MachXO with a 3X increase in logic density, a 10X increase in embedded memory and more than 100X reduction in static power. In addition, several popular functions such as user flash memory, IQC and FBI has been hardened into the MachXO2 devices further reducing customer’s power consumption and cost. We believe that XO2 will deepen the XO family penetration in the system control market and accelerate the family’s initial progress in the consumer market. With its increased integration, small footprint, low power and low cost we believe that the MachXO2 family can also increase our available market by pushing further into ASIC and ASSPs. Customer’s reaction to our MachXO2 has been positive and samples are already shipping. In October, we announced an addition to our mixed signal product offerings the Platform Manager family. A Platform Manager will simplify board management design by integrating programmable analog and digital logic to support many common functions such as power management, digital housekeeping and glue logic. By integrating these functions Platform Manager Devices cannot only reduce the cost of these functions compared to traditional approaches but it can also improve system reliability and provide a high degree of design flexibility that minimizes the risk of circuit board (inaudible). Revenue from FPGA products represented 33% of the total revenue in Q4 compared to 32% in Q3 are down slightly on an absolute dollar basis. On a year over year basis FPGA products were up about 46% on an absolute dollar basis PLD products represented 67% of the total revenue in Q4 compared to 68% in Q3 down approximately 7% on an absolute dollar basis. PLD product revenue was up 26% compared to Q4 2009 on a dollar basis. On a geographic basis, revenue from Asia including Japan decreased to 66% of the total revenue compared to last quarter 69%, revenue from North America increased slightly quarter-over-quarter to 15% of revenue compared to 14% in Q3. Europe increase coming at 19% of revenue compared to 17% of revenue in Q3. On an end market basis, communication was 46% of revenue in Q4 compared to 50% in Q3. The decline was expected and factored into our prior guidance we view this as a temporary pause and expect the comp segment to start rebounding in early 2011. Computing declined slightly to 13% of revenue in Q4 compared to 14% in Q3; frozen storage was offset by a decline in servers. Industrial and others came in at 29% of revenues in Q4 compared to 26% in Q3; the increase reflects a sequential increase in sales of our mature products. Consumer increased to 12% in Q4 from 10% of revenue in Q3, the increase was due to our focus on the consumer market. We see consumer market as the growth segment for us especially for our MachXO family. I will now turn the call over to Michael for a more detailed financial review. Michael?

Thank you, Darin. As noticed earlier revenue for the fourth quarter was $73.1 million a decrease of 5% from the prior quarter and up 33% from the year ago period. This is within our prior guidance for decline of 2% to 7% sequentially. Gross margin for Q4 was 62.7% compared to the 59.1% in the prior quarter. This was above the high end of our guidance reflecting the impact of higher sequential sales in our mature product category as the mix in our business was different than anticipated when entering the quarter. Total operating expenses for the fourth quarter came in at $32.4 million compared to the $30.7 million in the third quarter this was left on the guidance due to the shift and timing to Q1 2011 from Q4 2010 on some of our MachXO2 product mascot, which taped out in early January. As a result OpEx is expected to move up in Q1 to approximately $36.5 million the majority of the additional spend about $3 million relates to the full family production tape out of our MachXO2 family. The remainder is from timing of head account taxes and several small projects occurring in Q1 2011. We do not expect the level of tape out expenses to reoccur in any other quarter in 2011 although we are working on several new products that will have R&D tape outs during the year. Q4 net income was $13.9 million of $0.11 per share as compared to $15.4 million of $0.13 per share on the third quarter and compared to the $5.6 million or $0.05 per share in the year ago period all per share amounts are in a fully diluted basis. At the current share price we expect diluted share counts to be approximately 121 million shares. The share count reflects our purchase of approximately 371,000 shares valued at approximately $2 million under our $20 million one year share repurchase program, the program continues to be active. Moving on, our balance sheet was further strengthened in the quarter we generated an additional $15 million of cash from operations. Ending the quarter with cash, cash equivalents and short-term marketable securities balance of $238.2 million and we continue to have no debt. Not included in the liquidity discussion I just went through is the remaining balance of our auction rate securities with a fair value of $10.2 million due to the (inaudible) market for these types of investments auction rate securities continue to be classified as long-term marketable securities. Accounts receivable at January 1st were $41.2 million compared to 49.2 million at the end of last quarter and days sales outstanding were 51 days compared to 57 days last quarter and 55 days in Q4 of 2009. As noted on prior calls although our actual collection times have not materially changed the DSL metric has been and will continue to be impacted by our transition to higher sell through transactions, which causes higher growth billing. Inventory at January 1st 2001 was $37.3 million up from $31.7 million last quarter and up from $25.9 million in the year ago period. Months of inventory now stands at 4.1 months compared to 3 months at the end of Q3 2010 and 3.2 months in Q4 2009. The majority of the increase is in new products as we released the full family of ECP3 into production in 2010 we have been building initial stocking positions needed to meet expected future demand. Some additional inventory was built in our MachXO line in Q4 in order to serve potential turns business. Overall inventory in our base products matches our current short-term forecast. We expect our inventory to be back and balanced in the first half of 2011. We spend approximately $5.3 million on capital expenditures during the fourth quarter up from $3.9 million in Q3 with the quarterly depreciation and amortization expense at $3.8 million compared to the $3.7 million in Q3 the majority of the CapEx spending was on test equipment in order to meet our demand for newer products. This concludes the financial review portion of the call. And I will now turn things back over to Darin for the first quarter business outlook. Please go ahead, Darin.

Thank you, Michael. In summary, we feel very positive and Lattice and its prospects. I’m excited about the sales momentum of the XO2 family and it builds on the success of our XO2 products with its initial customer orders already in place. This new family makes our portfolio solution stronger as we work to meet our customer needs. We also plan to further strengthen our competitive position as we work to improve the efficiency of our R&D processes. Now let me turn to our first quarter expectations. We expect revenues to increase 2% to 7%. Q1 gross margins are expected to be in the range of 60% to 62%. Total operating expenses are expected to be approximately $36.5 million as noted by Michael earlier. Finally while Lattice has routinely provided mid quarter updates in the past but we are planning to go forward unless there is a material deviation from the guidance that we are providing today. This concludes our prepared remarks. Operator, we are now happy to take any questions.

(Operator Instructions) And our first question comes from the line of Richard Shannon with Northland Capital. Richard Shannon – Northland Capital: Hi guys, how are you?

Good, thanks Richard. Richard Shannon – Northland Capital: Congratulations on this very nice first quarter guidance here. I guess I have a couple of questions about the guidance in terms of the revenues I don’t know if you could handicap the moving parts by end markets any changes materially different than the kind of midpoint of your guidance anyone’s that are going to be better or worse will be great to know.

Well Richard, I would say that we expect ARMS [ph] to come back somewhat in Q1 compared to Q4 and I say we expect a lot of the growth to come from our newer products. I don’t think we are going to have a material change in the end markets from our normal pattern compared to what we had in the past. Our backlog is reasonably strong entering the quarter stronger than how we entered the quarter for Q4. And we expect turns as a percent of our business to be about the same as we had in Q4. So it looks like a reasonably good quarter with mix not too different than what’s normal for us. Richard Shannon – Northland Capital: Okay is seasonality would suggest that consumer markets will be down in the first quarter obviously you’ve talked about you know some new products are targeting that area. How do you expect the consumer to do in the first quarter at least in line with the midpoint of your guidance or how should we think about that.

Yeah I don’t think we see any big differences between Q4 and Q1 as far as you are talking about consumer or different products. Richard Shannon – Northland Capital: Consumer specifically, yeah.

Yes, we are not seeing a whole lot it typically depends on seasonality you get a lot of build up actually in Q3 and then seasonably Q4 kind of slows down a little bit with Christmas and those things. Q1 typically is a little bit stronger or flat in some cases but then it also is dictated by Lunar New Year and so we’ve got all that factored in already and we are looking at this thing fairly consistent and flattish to what we are seeing today. Richard Shannon – Northland Capital: Okay. Great and then just in terms of product age in the first quarter as well obviously matured it lot better than I was thinking that expected to be kind of flattish or upwards or that kind of give up some gains after the fourth quarter fits pretty well.

I think in terms of total revenue we don’t see a big change in the mature but you know we think as a percentage of revenue we are going to have more sales of our newer products in Q1 as a percent of revenue it may come down hence our margin target that we said between 60 to 62 versus the 62.7 we did in Q4. Richard Shannon – Northland Capital: Okay, that gets me into my next question on the gross margins I know you have been talking about as your consumer oriented products ramp out here to maybe see the gross margins come downwards overtime obviously. But seeing at a little bit longer term perspective I guess I was a little bit surprised to see it at this level going forward. But what should we be thinking about maybe an exit point this year any ideas you know kind of we are in the 59 range in the first part of last year kind of carries what should we think about as the consumer ramps in here.

Yes, we don’t give guidance for 2011 past Q1 but we have talked about in the past that is a model you know internally remodel in the high 50s for expectations for gross margin. It has more of a future number obviously we are going to fight as long and as hard as we can to keep margins as high as we can. To look at the expected mix with the strong growth and acceptance of our newer products and our push to get in some more of the consumer space we did feel that gross margin profile is more likely to be in the high 50s and the low 60s we’ve enjoyed recently.

And Richard just to add on to that anytime you enter consumer markets or lower margin markets it really does put pressure on you to have the cost reduction strategies and we will really be focused on all element of our operating expenses and cost right that’s really the trick to keeping the margins up. Richard Shannon – Northland Capital: Okay one last question from me and I will jump out of line in terms of OpEx understandably the math shift cost into the first quarter. How should we think about OpEx on a dollar basis going forward I want to make sure I did the math because you are mentioned some numbers there about a $3 million number is this something on a GAAP basis we should expect to say 32, 33 or lower than that going forward as since any other large math costs have come in over time.

Well I said that the math expenses in Q1 were about $3 million so we are not expecting to have math expenses anywhere near that level for the rest of the year. So I guess we haven’t given guidance past Q1 but you can use that kind of a guidepost for what you should use for your model going forward. Remember that we do have higher expenses the first part of the year because of the timing of the payroll taxes and a lot of our expenses in OpEx are driven by salary.

The other thing Richard is we take out multiple products at one time, which is why those math charges are higher and well you know obviously right. Richard Shannon – Northland Capital: Okay. Thanks.

Yes, part of our goal. Richard Shannon – Northland Capital: Great. Thank you I will jump on line. (inaudible)

Alright, thanks.

(Operator Instructions) Our next question comes from the line of Sundeep Bajikar with Morgan Stanley. Sundeep Bajikar – Morgan Stanley: Hi guys, thanks for taking my question. Could you talk a little bit about what do you see happening in the 3G wireless business your biggest competitors have talked about sort of seeing a decline in their business and China Mobile did you see a similar effect you know what can you say about inventory adjustment that you saw in this area.

Yes, so if you look at the comps business in general I mean there is a lot of elements depending on where you play. So remember that we are playing really in kind of the mid density FPGA comps segment and because of that I think that our we see a different actual and customer demand then maybe others too, which is why we didn’t see such a dramatic inventory shift. We saw kind of a short-term inventory shift and our forward-looking you know for at least this quarter we see things is fairly flattish if you will between Q4 and Q1 so we are not seeing this significant delta. On the other hand we are all set to consider that maybe there is other forces at play in Q3 and Q4 due to some of the constrains in the market. So people may have been trying to get as much material as they could because they were constrained so you may see some of the over inventory positions in other places of that comps market that maybe we didn’t see. Because we haven’t changed our lead time we haven’t changed any of that through the last couple of quarters, which you know feels for us it’s flattish to fairly consistent but we are expected to recover in the mid part of next year. Sundeep Bajikar – Morgan Stanley: Great that’s very helpful. Just shifting gears looking forward into LTE I guess if we assume volume deployments for LTE maybe two or three years away then it seems like you would have to win LTE sockets starting perhaps later this year to potentially play into that build. Is it fair to assume that you will start competing for those sockets with the next solution of ECP3 sometime this year?

Yes, absolutely I think that ECP3 was a great product for us as far as establishing in the mid range FPGA and the low power portion and low cost portion what we are trying to do. I think the follow on to that product is also very competitive as will be our future product line in this market segment. So we feel very comfortable with where we are on the current roll out and we feel comfortable that we can win the sockets in the future for with our product road maps.

The events we have now Sundeep is that we’ve had a couple of generations of the ECP family that’s done well in that mid range FPGA market. So our larger customers have experienced with their products and they can design using expected specifications as coming forward. So you know we are comfortable with the prospects we have in the market we are targeting. Sundeep Bajikar – Morgan Stanley: Great, and then one last question from me. If you could give us a few examples of some new devices in which you might have won design wins for with the XO2 especially the low power version potentially things that you could not target previously would be very helpful.

Yes, I think there is a lot of let’s just call them different applications they could be you know things from gaming and communications, professional music, multi function printers, LEDs, networks, mobile emergency and all sorts of things. It’s a very broad market because it’s incredibly low power, low cost solution that people are using in a variety of different applications. So those are just a few of the ones that we have today and we expect to get many, many more as we are rolling out these products. I mean today we are really sampling we are really setting up all the design wins. So we expect to be in production this year. Sundeep Bajikar – Morgan Stanley: Thanks a lot guys.

(Operator Instructions) We have a follow-up question from Richard Shannon with Northland Capital. Richard Shannon – Northland Capital: Hi guys, maybe a couple of questions extra here Altera and Xilinx have talked about their latest products picked on the 20 nanometer node and I know it’s been only a few days and in some cases here but we would love to get your assessment on the competitive dynamics here it seems like Altera may have put a little bit more emphasis on their mid range products than they historically have. They did mention specifically in their call really this week kind of curious about your assessment of what you’ve seen so far from them and just that they are planning to increase competitive risk going forward.

Yes, so you know as always we look at the market you know segments we play in and competitive threats that are out there and what we try to do is balance our strategy with the investments that we want to make and where we want to make them. And so any future technology investment that we make, you know, albeit 28 or whatever nanometer technology you want to be on. We typically look at that versus the capability to process the capability that it can give us both the performance cost to power versus the timing of the size or the density of the sweet spot that we are going after. So today we feel very comfortable with the road map that we have we feel very comfortable that some of the solutions and the architectures that are in the competitive landscape are really targeted maybe a little bit different segment than where we are albeit we know that we are going to have overlap. And so our challenge with our technology is really driving that super, super low cost design architecture it really does give us an advantage and as we move towards our future design we know the market as Michael said we have a lot of sockets a lot of understanding of what we are trying to do and we are in line with some of the real big guys in the market segments that we compete in. I think it’s always great to have competition because it drives you to do even more innovation and try to be not necessarily one generation ahead but the right time with the right product with the right feature and in our case it’s really about good or nothing green right and so we are going to really look at those things through time and make sure that we are always close enough to where you know we’ve got the wins that we need to sustain the growth that we are looking for. But obviously we look at that in very good detail and we use that as part of our strategic planning processes. Richard Shannon – Northland Capital: Great. I appreciate the things that you are doing. Thanks a lot.

(Operator Instructions) There seems to be no further questions. Do you have any closing remarks?

I just want to thank everybody for joining us on the call today and onwards. Thanks so much.

And this concludes today’s conference call. You may now disconnect. Thank you for your participation.