David Pasquale - Global IR Partners Darin Billerbeck - President & CEO Joe Bedewi - Corporate VP and CFO

Ruben Roy - Mizuho Nick Clare - Robert W. Baird Richard Shannon - Craig-Hallum Sundeep Bajikar - Jefferies Nathan Johnsen - Pacific Crest Greg Weaver - Invicta Capital

Good afternoon, ladies and gentlemen and welcome to the Lattice Semiconductor fourth quarter conference call. All lines have been placed on mute to prevent any background noise. During today's presentation, we will be conducting a question-and-answer session. (Operator Instructions). This replay will be available two hours after the end of today’s call. Thank you. I would now like to pass the call over to Mr. David Pasquale of Global IR Partners. Sir you may begin your conference.

Thank you, operator. Welcome everyone to Lattice Semiconductor’s fourth quarter 2011 results conference call. Joining us from the company Mr. Darin G. Billerbeck, the company’s President and CEO; and Mr. Joe Bedewi Lattice’s Chief Financial Officer. Both executives will be available for Q&A after the prepared comments. If you’ve 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 section of Lattice Semiconductor’s website. Before we begin the formal remarks, I’ll 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 2012. If at any time after this call, we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as a press release or publicly-announced conference call. The matters that we discuss today, other than historical information include 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 2010 Form 10-K filed on March 11 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 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 Principals or GAAP. At this time I would like to now turn the call over to Mr. Darin Billerbeck. Please go ahead sir.

Thank you, David and thanks everybody for joining us on the call today. Results for the fourth quarter were impacted by the same trends facing the broader semiconductor industry. The broader market continued to be weak and the communications business softened in December. Even with the challenging environment specifically in the second half of the year, we accomplished a tremendous amount in 2011, our major accomplishments in 2011 included. We took great care in assembling our executive leadership team. I am confident in the team and our ability to grow the business. We became the low density leader with our innovative, low-cost, low-power products. We broadened our MachXO2 product line. This has been well received by our customers as we gain traction in multiple low power and high performance markets. We launched ECP4 , low cost, low power 6 gig SERDES product for the LTE comps market. We released two more versions of our Diamond software. These releases continued to improve our product capabilities or making our products easier to use. We restructured the company for cost, efficiencies and to be closer to our customers. This effort increases our competitiveness in a global market. We established our R&D and operation teams in the Philippines. This expansion aligns another low cost, high value side to our core competencies in the United States. We completed our acquisition of SiliconBlue in December which I will touch on in a minute. Significantly during this period of uncertainty, we grew our revenue 7% year-on-year. Despite continued uncertainty, we remained focused on controlling our cost and our spending. This included our restructuring efforts to streamline our company for long-term efficiencies. We are supporting a healthy margin level, generating cash and maintaining a strong balance sheet. This gives us the flexibility to support our product portfolio, to launch new R&D initiatives and to pursue external growth opportunities like SiliconBlue. In terms of specific results for the fourth quarter, revenue of $70.2 million was down 14% from the $81.7 million in Q3 of 2011 and down 4% from $73.1 million in Q4 of 2010. The revenue mix of New, Mainstream and Mature was 50%, 27% and 23% of revenue respectively in Q4. New products were down 10% quarter-on-quarter reflecting a particular weakness in the comps market. Mainstream products were down 13% quarter-on-quarter. Mature products were down 22% from the prior quarter. The revenue mix of FPGA and PLD products was 31% and 69% respectively. The revenue decline was fairly broad based. On a geographic basis, revenue from Asia, including Japan, remained at 64% of the total revenue, but declined 15% on an absolute dollar basis. Revenue from North America increased quarter-on-quarter to 17% of revenue compared to 16% in Q3, but declined 4% on an absolute dollar basis. Europe was 19% of the revenue compared to 20% of the revenue in Q3, but declined 20% on an absolute dollar basis. On an end market basis, communications decreased to 42% of revenue in Q4 compared to 44% in Q3. Computing increased to 15% of revenue in Q4 as compared to 13% in Q3. Industrial and other came in at 30% of revenue in Q4 compared to 31 in Q3. Consumer increased to 13% of revenue in Q4 from 12% in Q3. Let me now take a minute to review our SiliconBlue acquisition. We closed the $63 million, all-cash transaction on December 16th. The acquisition of SiliconBlue is in line with our strategic long-range plan and will help us to accelerate our growth strategy in the consumer market. SiliconBlue further strengthens our product roadmap by adding a scalable low-cost, low-power non-volatile memory FPG along with key personnel and industry-leading customers. I am also pleased that Kapil Shankar, SiliconBlue’s Chief Executive Officer has joined Lattice as our Corporate Vice President of our consumer business unit, responsible for the company’s consumer product lines. SiliconBlue was a great deal for us as it met our previously stated acquisition criteria. That criteria included strategic product alignment, R&D technology alignment, the right location with a valuation that made sense. We are now shipping SiliconBlue 40-nanometer product. Importantly, the complementary product lines give us the ability to offer a full range of functionality and price points to the consumer market. SiliconBlue has shipped over 10 million units to customer OEMs and has design wins at consumer OEMs and has design wins at multiple Tier 1 smartphone, tablet and digital camera customers. Our integration of SiliconBlue is progressing well and we are optimistic about the upside benefits from the acquisition. That concludes my initial comments. I will now turn the call over to Joe.

Thanks Darin. For our discussion of results for the fourth quarter of 2011 reflect our acquisition of SiliconBlue Technologies. As noted earlier revenue for the fourth quarter was $70.2 million, a decrease of 14% from the prior quarter and 4% from the year-ago period. Gross margin for Q4 was in line with our original guidance at 57.7% compared to 58.6% in the prior quarter and 62.7% in the year-ago period. The decline was driven by absorption of fixed overhead, customer mix and impact from the integration of SiliconBlue. Total operating expenses for the fourth quarter came in at $34.8 million which was lower than Q3 and significantly lower than our original guidance of $36.5 million. Q4 includes the impact of SiliconBlue which was not factored into our Q4 financial guidance at the end of Q3. Our lower OpEx levels reflect our continued focus in Q4 on restraining operating expenses as we continue to manage our business in this uncertain environment. We incurred approximately $1.1 million in restructuring charges in the quarter compared to $1.8 million in Q3 2011. As noted in the release, we expect to incur restructuring charges in Q1 related to our previously discussed transfer of our operations to our low cost site in the Philippines. Our operating expenses will be up in Q1 as we integrate our SiliconBlue acquisition with Q2 then coming in lower than Q1. Q4 net income was $40.9 million or $0.34 per diluted share as compared to $13.3 million or $0.11 per diluted share in the third quarter and compared to $13.9 million or $0.11 per diluted share in the year-ago period. Restructuring charges of $1.1 million in Q4 represent $0.01 per diluted share. The fourth quarter of 2011 also included $0.5 million of related acquisition costs. In the fourth quarter of 2011, we recognized a tax benefit of $35.1 million or $0.29 per diluted share related to the release of tax valuation allowance for certain deferred tax assets based on an evaluation of a likelihood of use of these tax attributes due to the improvement in our operating results in 2011and the implementation of a new global tax structure during the fourth quarter of 2011. We anticipate completing the global tax restructuring during the first quarter of 2012, which will result in a tax provision of approximately 10.8 million or $0.09 per share. At the current share price we expect diluted share count to be approximately 120.6 million shares. This share count reflects the retirement of approximately 2.8 million total share, purchased under our previously announced share repurchase program at a cost of approximately 16.4 million. We concluded our stock repurchase program on October 20, 2011. We generated an additional 10.3 million of cash from operation ending the quarter with a cash, cash equivalents and short-term marketable securities balance of $210.1 million and we continue to have no debt. This reflects the acquisition of SiliconBlue for $63 million in cash. Accounts receivables at the December 31 were $37 million compared to $53.5 million at the end of last quarter and day sales outstanding were 47 days compared to 59 days last quarter and 51 days in Q4 2010. Inventory at December 31, 2011 was $37.3 million compared to $35.1 million last quarter. This included the addition of $2.5 million from our SiliconBlue acquisition. Months of inventory now stands at 3.8 months compared to 3.1 months for the end of Q3 2011. We spent approximately 4.3 million on capita expenditures and four million on deprecation and amortization expense, both were flat Q3. This concludes the financial review portion of the call and I will now turn the things back over to Darin for the fourth quarter business outlook. Darin?

Thank you Joe. In summary Lattice remained in the strong, clearly defined market position with solid financials as part of our business strategy. We continue to focus on lowering our cost structure and accelerating our new products to market. We are totally committed to delivering affordable innovation to our customers. Regardless of today’s environment we remain confident in our long-term growth prospect and will continue to drive further R&D, sales, cost and operation efficiencies. Let me now turn to our first quarter 2012 expectations. We expect revenues to be up approximately 1% to 5% as compared to Q4. Q1 gross margins are expected to be approximately 57% plus or minus two points. Total operating expenses are expected to be approximately $39 million including approximately $0.8 million in restructuring charges and $0.9 million of acquisition related cost. As noted in our press release I mentioned earlier, income in Q1 will be affected by a Q1 tax provision of approximately $10.8 million, primarily associated with the completion of the company’s new global tax structure. This concludes our prepared remarks. Operator, we will now be happy to take any questions. Ruben Roy - Mizuho: Thanks for taking my question. First of all, could you just get into a little bit more of the SiliconBlue impact because the acquisition closed on December 16th, I am just wondering if you kind of drill down into the impact from that two gross margin in Q4 and how you kind of see that playing out in 2012?

So we includes the period since the close from December 16 through the end of the year plus you have purchase accounting related results in there. Plus you have purchase accounting related results in there. We’re not specifically identifying SiliconBlue impacts. We’re incorporating in to our whole. So, there is two weeks of SiliconBlue impact in the fourth quarter and the purchase accounting related impacts of intangibles, amortization and so forth, as well as acquisition related costs. Ruben Roy - Mizuho: Okay. And I guess, then Joe, you’re not going to, kind of, separate out what SiliconBlue will contribute in Q1?

No. We’re going to be integrating and moving forward with them. They’re rolling right into our consumer mobile type operation. Ruben Roy - Mizuho: Okay. And it looks like you’ve changed everything to sort of GAAP reporting. Is that how you want the kind of the models to look going forward?

We’ve always been GAAP. Ruben Roy - Mizuho: You’ve included some additional in so there on stock comp etcetera historically, right? We can take that offline.

Yeah. Let’s do that because I think it’s in line with what we’ve reported in the past. Ruben Roy - Mizuho: Okay. So, I guess, this question is another one. You might not answer but I mean, can you just give us a little bit of guidance on the core business in terms of how it shaped up. Obviously, with the (Inaudible) announced things slow down a little bit at the end of Q4. But thus far in Q1, have you seen any changes, by end market as you look at it?

I think. You know, as we talk, I think in the, probably in Q3 and in Q1, most everyone thought that the market was slowing but not to the rate that it slow it in the Comms site. And I think what we all saw was more of the October taking off as a normal quarter and by November and Decembers time, it started to slow down significant slowdown in the Comms till December. We were really curious with everybody else when they thought that would recover. For us it looks like it is not fully recovered obviously in Q1, otherwise our revenue would be higher but we do see kind of end if you will of the Q1 timeframe at least that’s where we are looking at. I think most of our competitors are seeing similar things in the Comms market. Ruben Roy - Mizuho: Right okay Darin, just a last one for Joe. In terms of the OpEx commentary in Q1 obviously they are going up in Q1 but you said lower in Q2 and can you just give us the idea of the magnitude of that or the delta there and how that plays out through the restructuring of the year.

As we integrated SiliconBlue we expect to see OpEx drop between $1 and $2 million.

The next question comes from the line of Tristan Guerra with Robert W. Baird. Nick Clare - Robert W. Baird: Hi guys this is Nick Clare calling for Tristan Guerra. So I think you kind of briefly touched on this during the prepared remarks and in response to the last question. So maybe I can try and rephrase it. But looking kind of at this quarter did you talk about the gross margin pressures and kind of where they came from. I know you are not discussing specifically SiliconBlue and maybe moving forward but are you seeing during this quarter your expectations moving forward any pricing changes from your competitors?

I don’t know we saw any of those directly that were different from any other quarter. There is always pressure in those market. The question I think you are really alluding to is, do we expect pricing pressure moving forward if the Comms market slows down and I would anticipate, I mean our goal has always been to low-power and low-cost and focus on those things, so that we can live in a market regardless of the environment. So in some of those cases with the comms market, I would expect it to get more aggressive through time but that’s what we are prepared to focus on, which is really that mid range and below low-cost, low-power. Nick Clare - Robert W. Baird: Okay. Then a last one. I believe you mentioned that you expect to see a bit of I think you said $10.8 million or $0.09 per share in help from the tax restructuring in 1Q ’12 as well, correct.

Yeah, in Q1 2012 it will be a negative impact of $10.8 million. Nick Clare - Robert W. Baird: Negative impact okay.

Right, so we had the upside this quarter. We see the completion of our global tax restructuring in Q1 and that's the impact.

Our next question comes from the line of Richard Shannon with Craig-Hallum. Richard Shannon - Craig-Hallum: I will try my regulatory SiliconBlue question well this year, how close you would like to be able to answer it. I guess from a big picture point of view this year any sense of the level of dilution you are expecting this year EPS wise. Anyway you can help us about that?

Let's do this. So I will answer it slightly different. Our expectation is as we move to 40 nanometer on SiliconBlue it gets very close to our corporate margin structures and so what are trying to do is really drive to a 40 nanometer production rate, which is what we are trying to kind of close off in Q1 but it takes a little bit of time to get that flow through the system if you will, but the goal on SiliconBlue is to get them to our corporate margin goals. Richard Shannon - Craig-Hallum: Okay. I guess the reason of my second question, which is you've given a gross margin number for the first quarter here. I guess normalizing for everything but SiliconBlue, how would you anticipate that trending throughout this year? I mean is it something that could get back up to the 59 range that you talked about last year or is the 57 kind of a good starting point to think about?

That’s the current forecast that we put out for Q1, this is a transition quarter Q1. So we have SiliconBlue, integration of SiliconBlue. We are going to start seeing benefits of our move to the low cost Philippines side that will impact gross margin also as our complete operations function is there. So we expect to see some uplift that is highly dependent and the biggest variable in our gross margin is customer mix. So depending on the customer mix going forward that’s our biggest variable. Right.

So remember that we have kind of doubled accounting in the operations team as we trend away from Oregon over to Philippines and that transition will be completed in Q1. Richard Shannon - Craig-Hallum: Okay. And there the cost is all in COGS and not OpEx?

Correct.

Correct. Richard Shannon - Craig-Hallum: Okay. very helpful.

And the other thing is, remember we took the restructuring charges of 0.8 million. Most of that is in there. Richard Shannon - Craig-Hallum: Got it. Okay, very helpful thanks. Next question and actually one of the other guys asked this, I got cut off briefly but the conversation you were having with your larger communication customers specifically on the wireless side, what are they telling you is first quarter do you expect that to be flatter even growing or what your customers telling you about return to maybe normal and I’ll use a couple of quotes around that normal rate of business that maybe you saw last year before?

I mean they never tell you a lot. We have some customers positioning for bigger Q2s and Q3s. You never really believe it till you to see backlog kind of things and then you have others that are slow to act. So you kind of get a mix in there. Or for Q1 obviously we forecast that the comms market to be down from what it would normally be, but my expectation is that you are going to see some rebound on that in the Q2 timeframe. I mean at least from the things that we’re seeing with the backlog in some of the other things we were focus on today but again it’s a very thick market where they go up and down very quickly. So our expectations as Q2 should be of a stronger comms market. Richard Shannon - Craig-Hallum: And maybe just two more quick questions from me, inventory in the channel, what’s your feedback from the channel, are you sitting in a good position or is some burn going, still to go on here, any thoughts on that?

Remember, there is not a lot of inventory in the channel and at least the comms customers that we’re focused on you know being here kind of inventory. But when you look at inventory overall, it’s not anything that’s alarming for us and in facts it’s at healthy levels for the distributors. And remember, our inventory actually went down slightly on some of our product lines and we did that on purpose right, as we start funneling through some of the product mix changes we want and then some of the other cost elements that we’re putting on. We also have other cost things that we focus on throughout the year like conversions, the goals and things like that and also for conversion to copper side from gold, we have monitor those ops focuses for this year to drive the cost structures down.

Your next question comes from the line of Sundeep Bajikar with Jefferies. Sundeep Bajikar - Jefferies: Just to complete the discussion on Q1 outlook, could you please share your views with us on expected sequential performance in industrial and computing markets, as well as consumers I guess what would that be?

Yeah, I mean, consumers always kind of see as a whole right, in terms of Q4 to Q1 kind of thing, but we’ll see how that goes. And our consumers really going to go with the products that we currently have in the market along with SiliconBlue right and we don’t see anything that’s abnormal in that market today. I think when you talk about industrial I think that’s going to be hammered by the European situation. So it’s interesting because there is different people calling it up and down and I think for us, we don’t think it out. We don’t see this abnormal today. But I wouldn’t call it as a gross up or gross down in Q2. That’s what you’re looking for. Sundeep Bajikar - Jefferies: And then within communications, how do you think about Lattice’s exposure to end demand from Asia versus North America versus Europe. My understanding is you have the most exposure in Asia; but if you could just help, give us a framework for that, that would be helpful?

So remember though, you know, our product mix you know, people want to focus a lot on the ECP3 product line which is more of a 3G build out but XO is in a lot of other product lines. It could be an LTE, it can be everything else. So XO have a lot of comms exposures worldwide, right; which is good in some cases because it takes some of the variability out. ECP3 even though it’s sold worldwide, can be a little bit more focused on Asia, right. So you know if Asia does slowdown then that can slow down a lot of things for everybody. But I would argue, you know we’re were pretty global on that comms things with all of our product lines and even including our [4K series] too. There are some other more products in there that was sold into the comms market. So you know, it’s hard to tell today. We’re starting to see some customers plummet in Asia; other customers are just holding. So I don’t know that anybody knows at this point what’s going. Sundeep Bajikar - Jefferies: Now in terms of OpEx, I think last quarter I think you had provided guidance that OpEx will roughly be 40% of revenues 2012. Has that view changed after SiliconBlue?

We will get there as we move through 2012 and integrate SiliconBlue into the operations. So it really hasn’t changed. Q1, again being a transition quarter, we’ve got some, higher levels of OpEx then we will as we move forward. Sundeep Bajikar - Jefferies: And then finally on the tax rate; what should be assumed for the full year 2012?

We are going to come into a rate between 11% and 14%. It’s where we’ll end up. And well of course we’re still active going forward.

(Operator Instructions) Your next question comes from the line of Nathan Johnsen from Pacific Crest. Nathan Johnsen - Pacific Crest: Just wanted to come back, you guys mentioned that you expect OpEx to drop $1 million or $2 million; are you saying that you expect that to drop $1 million or $2 million by the end of 2012 or was there a different timeframe there. And then on the SiliconBlue in terms of the margin structure you talked about that being fairly dependent on the ramp at 40 nanometer; I was wondering if you could talk about what that looks like in terms of the speed of that ramp; at what point do you I mean for a portion of SiliconBlue being on 40 nanometer?

So let’s first talk about OpEx, right, so you’re going to see OpEx you know when Joe had alluded to $1 million to $2 million, that’s going to increment down over the year. And the reason for that is as we do integration and get some of the efficiencies through SiliconBlue that will help us as we drive that downward right. So the OpEx thing is going to take us a few quarters as we drive it down. Obviously, we want to do it as fast as humanly possible, but there are -- you also want to preserve the value. On the SiliconBlue margin structure, the 40 nanometer is it for us and we knew that going into this acquisition of 40 nanometer was the push that we needed to have and we’re going to do that digitally. Its not the same market as you would take a normal FPGA, meaning that a lot of the conversion activity is part of SiliconBlue’s efforts not necessarily always the customers; meaning in a typical FPGA, you are selling an FPGA if you want to convert it takes a long time, because you have to go through system validations and all this stuff. The way that the SiliconBlue products are architected, it’s easier to drop products in from new technologies into older technology slots, right. So we expect that that conversion to happen not exactly digitally, but pretty close and so we’re shipping that 40 nanometer today. Our plans are to minimize if not zero-out the 65 nanometer shipments in the next quarter. Nathan Johnsen - Pacific Crest: And then just one last thing, I guess one more clarification, you mentioned for industrial its hard to see and take Q2 but I guess, I didn't get a good sense whether you were looking for industrial to be up or down in Q1?

Yeah for Q1 we’re seeing it pretty flat right now. We didn't see a big up-tick or down tick in the industrial. So we’re kind of calling it flat and I think somebody before had asked, hey when do we see the rebound and that's super hard to tell right now. I mean in Europe, who knows I think in the United States it feels fairly comfortable in United States, but in Europe I don't know.

Your next question comes from the line of Richard Shannon with Craig-Hallum. Richard Shannon - Craig-Hallum: I just had a quick follow-up. You introduced the ECP4 a couple of months ago now, what's been your feedback, you have been talking to customers, what’s your feel for ability to maintain or even gain share in this kind of mid-density FPGA market?

Yeah, so the feedback’s been really good. I think it’s a solid product that addresses, it moves us up a little bit within the food chain if you will from the 3 Gig to 6 Gig. We knew that was more of an LTE play with a higher performance of that product. So we’re getting some pretty solid feedback from the customers. I wouldn’t expect to see a whole lot of volume of ECP4 this year, because again, we’re sampling and those systems take a while to get them designed and then all the validation and verification on our customer standpoint. But the good news is, we’re out there and we have the next version of it and it’s the solid product offering at least from a customer perspective and from our perspective.

Your next question comes from the line of Greg Weaver with Invicta Capital. Greg Weaver - Invicta Capital: I can understand and appreciate that you don’t want to give full information on SiliconBlue, but you could give us a little snapshot to kind of you know what they were before you bought them in terms of run rate margins and operating expenses?

Yeah, I mean we paid $63 million right; and what we tried to do all this, you guys have to do the math on this, but we weren’t outlined with any of the acquisitions of this type, at this size with and either multi-players on revenue. So, we feel comfortable with this purchase and we really don’t to want to any guidance on that moving forward, right; we are going to combine all this as part of our FPGA [offering].

And your next question comes from the line of [Bill Dezellem]

Speaking of new products right here earlier this week you announced the ECP3 increment to that family. Would you consider that to be a major product announcement or is this just incremental in terms of what you need to do just to remain competitive?

Yeah, so it’s really an expansion of the current ECP3 family offering. There is a lower power version of the product that we’re offering today and then a higher performance version of that. And it’s specifically focused on the higher performance version, specifically focused on the video applications that we’re going after. So, and we did some packaging. We have some other packaging technologies that we’re doing to give us smaller form factors overall. So they are a little bit tighter pitched smaller form factors. So an extension of what we have today is not considered a major overall of the product line accessory moving ahead.

And there are no more audio questions in queue. Mr. Darin Billerbeck, do you have any closing remarks?

Just thanks for everyone that’s called in today, listened to our call and we’re going to continue to drive the business up and the cost down. Thanks so much.

And ladies and gentlemen, this does conclude today’s conference call. We appreciate your participation. You may now disconnect.