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

Tristan Gerra - Baird Ian Ing - Lazard Capital Markets Sundeep Bajikar - Jefferies & Company Richard Shannon - Craig-Hallum David Duley - Steelhead Securities Bill Dezellem - Tieton Capital

Good afternoon. My name is Shemaria and I will be your conference operator today. At this time, I would like to welcome everyone to the Lattice Semiconductor Fourth Quarter 2012 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'll now turn the call over to Mr. David Pasquale, of Global IR Partners. Sir, the floor is yours.

Thank you, operator. Welcome everyone to Lattice Semiconductor's fourth quarter 2012 results conference call. Joining us from the Company today are Mr. Darin 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 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 of the Investor Relations section of Lattice Semiconductor's website. Before we begin the formal remarks, I'll review the Safe Harbor statements. 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 2013. 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 2011 Form 10-K 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 will also be presented within the requirements of SEC Regulation 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 the call today. In terms of Q4, revenue was $65.9 million. This was in line with our revised guidance for revenue to decline 6% to 8% compared to Q3. Our results reflect to continue challenging macro environment with broad based weakness across nearly all market segments, geographies, except for consumer. We do not expect positive macroeconomic improvements in the short term; we are seeing some encouraging signs in the first half of 2013. We are cautiously optimistic based on channel feedback, inventory reports and forecast from the comms market segment. As we move through 2013, we expect to benefit from attraction in the consumer market segment. With the iCE40 family, we were successful on our efforts to penetrate the consumer market in 2012. We shipped more than 15 million iCE40 devices over the past year making iCE40, one of our fastest ramping product families ever. We see more room for growth given the size of the consumer mobile market, low cost, low density and affordable innovation from our OTP technology makes iCE40 family a winner for us. We are also benefitting from aggressively and targeted sales and marketing efforts. As part of our corporate restructuring we took the opportunity to add several new senior managers with highly proven industry background. They're excited by our market position, our market strategy and the strength of our product line up. We continue to up level Lattice talent to better align our capabilities with our market growth opportunities. In terms of added color for the fourth quarter, the revenue mix of new, mainstream and mature was 29%, 53% and 18% of the revenue respectively in Q4. On a full year basis the revenue mix was new 22%, main 56% and mature 22%. Revenue from our new product was up 1.7% quarter-on-quarter. For the full year 2012 compared to 2011 new product revenue increased approximately, 80% reflecting strength in our ECP3 and iCE40 product shipments. This is in line with our comments in prior calls and continue to reflect our momentum in both consumer and non-consumer areas. 2012 was clearly a transition year for Lattice. We expect to see continued growth in our product segments with a focus on accelerating both low density and ultra low-density design win. Mainstream products were down approximately 9% quarter-on-quarter. On a full yea basis mainstream products were down about 18%. This reflects general macro economic weakness that is impacted 2012. Revenue from our mature product was down about 14% when compared to the prior quarter, revenue from our mature product was down about 35% on a full year basis. While we anticipate declining revenues in mature market segment, these products move to the lifecycles, in 2012, the decline was further impacted by overall market condition and weakness in the comp segment. On a geographic basis, revenue from Asia, including Japan, was about 69% of the total revenue which is consistent with Q3. On an absolute dollar basis revenue from Asia decline quarter-on-quarter due to inventory correction at major OEMs. Revenue from North America is roughly flat Q4 to Q3 and absolute dollars which translates into a slight uptick to 15% of total revenue. Europe decline to 16% of revenue from 18% in Q3, the decline in Europe was caused by continued softness in the [disc] channel. On an end-market basis, communications represented 41% of revenue in Q4 compared to 47% in Q3. This reflects ongoing macro weakness in the comms market segment and inventory corrections at major OEM in Asia. Computing was down slightly to 11% of the revenue in Q4 as compared to 12% in Q3 due to slow market condition in the data processing infrastructure market. Industrial and other was slightly up to 28% of revenue in Q4 from 27% in Q3 reflecting increase penetration into non-comps revenue opportunity including automotive. Consumer increased to 20% of revenue in Q4 from 14% Q3 The slight decline on an absolute dollar basis was due to a decline in the server market. Industrial and other was flat at 27% of revenue in Q3 and in Q2. Consumer increased to 14% in Q3, primarily reflecting the continued ramp of our iCE 40 family. That concludes my initial comments. I will now turn the call over to Joe. Joe?

Thanks, Darin. As noted earlier, revenue for the fourth quarter was 65.9 million, a decline of 7.1% from the third quarter and a decline of 6.1% as compared to Q4 2011. Gross margin for Q4 was 54.2% compared to 54.4% in the prior quarter and 57.7% in the year-ago period, this is inline with our original guidance. We continue to drive additional cost reductions in operations and direct materials we should deliver benefits as we move forward. Total operating expenses for the third quarter came in at 42.1 million this includes 5.4 million in restructuring charges, the total 42.1 million is about 900k below our original guidance. Net loss for the quarter was 7.2 million or $0.06 per basic and diluted share as compared to a net loss 2.2 million or $0.02 per basic diluted share in the third quarter, when compared to net income of 40.9 million or $0.34 per diluted share in a year ago period, there was a tax benefit in Q4 2011 of about 35 million or $0.29 per diluted share. Our Q4 2012 tax provision declined 2.4 million, our cash tax impact remains minimal. For the quarter diluted share count was approximately 115.9 million shares. The share count reflects the retirement of approximately 1.3 million shares purchased at a cost of 5.2 million in the fourth quarter. Our year-to-date total shares repurchased is now at approximately 4.1 million shares, acquired at a cost of approximately 17.5 million under our previously announced 2012 stock buyback program. We ended the quarter with a cash and cash equivalents, short-term and long-term marketable securities balance of 188.1 million, and a decrease of 2.8 million over the September quarter. And we continue to have no debt. Accounts receivable at December 31, were 46.9 million compared to 56 million at the end of last quarter. Day sales outstanding were 64 days compared to 71 days last quarter. Inventory at December 31, 2012 was $44.2 million compared to $37.4 million last quarter months of inventory now stands at 4.4 months compared to 3.5 months at the end of Q3 2012. Inventory growth is driven by selective inventory positioning for future opportunities and opportunistic increases in wafer starts. We've spent approximately $2.4 million on capital expenditures and incurred $6 million in depreciation and amortization expense during the fourth quarter, compared to $3.2 million and $5.9 million respectively in Q3. This concludes the financial review portion of the call, I'll now turn things back over to Darin, for the fourth quarter business outlook. Darin?

Thank you, Joe. In summary, we accomplished a lot in 2012. We integrated SiliconBlue into the Lattice family and we made our iCE40 products accretive before the end of the year, our results reflect continued progress in the consumer segment and penetration into worldwide smartphones. Revenues per consumer helped us to offset some of the continued macro weakness in other markets segments. We also continued to grow ECP3 in the comms market while continuing to create momentum in our MachXO2 product line. We made the difficult decisions last year to streamline and restructure Lattice in the face of a weak market and lower revenue base. This was difficult, on all of our, but it was the right course of action given the fragile market environment. Our goal to return to growth and sustain profitability in 2013, we have a talented in place. The right products and an exciting roadmap. We also remained fully committed to further reducing our cost while improving our efficiencies at the company. Let me now turn to our first quarter 2013 expectations. We expect revenue to decline approximately 2% to 4% as compared to Q4. Q1 gross margins are expected to be approximately 54% plus or minus 2%. Our operating expenses are expected to be approximately 35.5 million including approximately 0.5 million related to the 2012 restructuring plan. This concludes our prepared remarks, operator we will now be happy to take any questions.

(Operator Instructions) Your first question will comes from the line of Tristan Gerra with Baird. Please go ahead with your question. Tristan Gerra - Baird: Hi, good afternoon. You talked about additional opportunities in terms of operating expense reductions are we still on track for an additional million in OpEx reduction in Q2 and is there any potential for additional reductions in second half or should we be looking at that level as a kind of ongoing rate?

So the 35.5% has about $0.5 million of restructuring charges in it so that will be gone in Q2. I would expect to be close to 35% possibly lower. Tristan Gerra - Baird: Okay and so is it fair to send that this would be then the ongoing run rate for OpEx or there are addition potential opportunities beyond that?

Right now I would hold it this, there are some opportunities but it fluctuates and varies based on mass charges. So consistent with forecasting 35% is probably a good number. Tristan Gerra - Baird: Okay and so based on that number how much revenue growth does this OpEx level support before you'd need to ramp OpEx again, so can you withhold 30% or 20% in revenue growth before you need to spend additional amount in OpEx?

Well, spend in apex will be variable going forward till we get to roughly the $80 million plus range per quarter then you'll just see variable spending related to commissions basically that will be the only growth. Tristan Gerra - Baird: Okay, okay. And then just quick last one, if you could talk about what you see as the key revenue driver for this year you've mentioned few products but if you could provide some more colors and also by geography what do you think you know could lead to a rebound and notably in communication?

So I would look at it this way so we still have no momentum with ECP3 into the comms. Right, so if you look at our ECP3 product, really being a 3 gig SERDES up to 150k lots that's one product line that we'll continue to grow primarily in Asia, as Asia recovers. Also we have the MachXO2 family which we introduced about year and half two years ago which is gaining quite a bit of traction. So I am expecting that to grow this year iCE40 is going to go probably faster then both of those which is good. And then we also have the Power Manager product line that we expect to grow modestly this year. So our primary growth will be ECP3, comms, iCE consumer, MachXO2 broad distribution and broad play primarily in comms but also can play in other areas and then you're going to have power manager that plays industrial automotive and other areas. Tristan Gerra - Baird: Great, thanks a lot.

Okay.

Your next question will come from the line of Ian Ing with Lazard Capital Markets. Please go ahead with your question. Ian Ing - Lazard Capital Markets: Hi Darin, hi Joe, good afternoon.

Hi there. Ian Ing - Lazard Capital Markets: So you as you look at 2013 perhaps this consumer PLD application, which are you most excited about whether it's like barcodes scanning, [internet tuning], sensor bridging maybe there's something that I missed there?

Yeah, there's some other ones that we can't talk about but yeah, those are some we're excited about there's some other ones out there proprietary that are proprietary, that's good but yeah we're excited, in that particular market, from a geography standpoint I think that Asia will probably be the primary driver of lot of the - the growth that we see. I don't expect obviously there's no consumer growth anywhere else than that, right. And maybe some in the United States as we talk about, but most it's built over there. Ian Ing - Lazard Capital Markets: Now for sensor bridging it seems like there are some winds out there and they went to MCU Solutions so perhaps, can you lay out the plus and minus says of yours your solution versus of MCU's?

Yeah well the first one is flexibility to do multiple configurations on the fly so because the cost structures are pretty close in general terms, our form factors are smaller, the cost structure is about equivalent, the flexibility is way higher and the fact that we can also do design service for people also makes a big deal. Ian Ing - Lazard Capital Markets: Okay great and then you know big, big, FPJ competitive, Altera, it feels like ages ago, but they talked about refreshing there CPLD line getting more into your space perhaps you can talk about that I don't know how much of the product you've seen but how would potentially defend against some refreshed products here?

Yeah I mean it's obviously easier to defend when it's a real product but XO2 has been in the market for at least two years that competes against some of the lower density products, I think 180 nanometer. So as those products rollout, yeah for sure, they're going to be an – and I would anticipate the MachXO and MachXO2 space, so we would competitive with that. We already compete with that today. So that's nothing new. And if they refresh those models on 45 nanometer work for those technologies and you know its there game for everyone but today we run 65 nanometer on XO2 which is pretty smaller die, and I think they're on 180 nanometer. So that's the comparison today if I they move to 40 nanometer that will be interesting yeah I haven't seen that product out today but I heard about it. Ian Ing - Lazard Capital Markets: How about the [thought] of cross selling like you know Altera has a very broad product line with that would be any issue have you managed that's so far?

The way I look at it as you break the market segment into a couple pieces there's a really the high density there's the mid density and then there's the low density right. And iCE is actually [holds through though] because iCE you are talking about. So one 1K devices whereas I will tell the other devices you can go up to 816K and then when you get the mid density, it's even higher from a lot perspective, and so there is a bunch of different product frontline of everything. Our plan is to really fill out the entire roadmap from the ultra low density all the way up to about 110K to 150K. So that's the plan that we have and we are executing on various technologies to find the best cost points for performance performed factor, but we wanted. Our primary focus is to lead the LD any ultra low density space. Ian Ing - Lazard Capital Markets: Great and my last question making in your prepared commentary you talked about some better signs in the comps and other markets in the first half for this year based on forecast and order patterns is that try to any particular deployments or just things are getting from macro scales perhaps for little more detail there, thanks.

Yeah I don't know to try to any deployment its more try to effect that we saw some upstairs and the middle of last year and in Q4 was almost like a retracing for every base. So lot of there suppliers drop off in Q4 and then were starting to forecast with some of the backlogs for the first half of the year. So that's really comes from you know see as much in Q1 because it still kind of bottoming out what we see more of the attraction in Q2 and beyond. Ian Ing - Lazard Capital Markets: Okay some of its inventory refurbishment at this point sounds like?

I think most of it I think lot of it is you know they just built too much last year, they really put stop in Q4 which I think heard everybody and then Q1 they really just certain rebuild as they are blowing through all the material that they had from last year. And that's not any difference in the last two years by the way last two years I have been here keep for always down compared to Q3 and then Q1 kind of the loan and Q2 and Q3 start rising up. Ian Ing - Lazard Capital Markets: Okay thanks a lot.

Yep.

Thanks Ian.

(Operator Instructions) Your next question will come from the line of Sundeep Bajikar from Jefferies. Please go ahead with your question. Sundeep Bajikar - Jefferies & Company: Hi guys just a couple of questions from me. So first of all how should we think about revenue growth for the year 2013, if you could give us some sort of a framework to think about how to model that?

So we can't really give anything past Q1 so that really good to give but I would say that the second half for us at least if you look at it looks better than the first half at least to be look in that timeframe. Sundeep Bajikar - Jefferies & Company: Okay, if I look at to your segments the communications computing and industrials are each down about 30% from there peak levels in 2011, well consumer is our boom is 90% just over the last six months. So going forward for each of the segments can you talk about seasonality estimates for us to think about as we model revenue growth and if you expect any specific positive or negative seasonality to be more pronounced in any of the segment this year?

If you look for seasonal in comps because we seen that one right. So comps at least for last two to three years, comps can start slowly ramps up Q2 and Q3 and then rising will be two to three four years Q4 is down. That's what it seems like and if it seems to play out like. Consumer is different. Consumer there is two things drive consumer. One thing used to be lunar New Year and the other one was back-to-school., right, but what we are starting to see in the smartphone industry is its launch base. So some people try to launch at CE or not CF, but it's the world, the world used to be the old 3G FM forum in Barcelona. Some people like to launch there and then there is other people that have their finite launches. So consumer tends to be model oriented and launch oriented and some of those launches are not always tied to specific comp. So you can't say that oh, it's always going to be down in Q4 we actually saw some growth in Q4 so consumer I think is dependent on the launch dates of our end customers, which doesn't seem to follow a trend. Sundeep Bajikar - Jefferies & Company: Okay, and what about computing and industrials?

Yeah, computing would follow a lot of the roll offs of the cloud, right which is really an IT build, which I think follows a lot of the comps deal. So computing and comps seem to follow that. Industrial doesn't typically follow a trend it's usually a modest growth rate because you are building out you know equipment and manufacturing. So industrial typically from what we have seen isn't that cyclical. Sundeep Bajikar - Jefferies & Company: Okay, just a follow up on computing being down that much over that period. My understanding is you ship primarily into the silver market for the cloud like you mentioned and that market it doesn't sound to me like that market is down that much. So if you could just give us, any sort of color on what might be happening there, what specific patterns you are seeing that would be helpful?

Yeah, we are starting to see a couple key OEM's that are down. So it's not an indication of our market, we have a couple of big OEM's that are down. Sundeep Bajikar - Jefferies & Company: Okay, and then…

And I think they are down, they are down just overall because of their performance in the market. Sundeep Bajikar - Jefferies & Company: Okay that's fair, and then last one from me. You had positive growth from the Americas in the last quarter, while I guess the other two geo's were down sequentially. Should we assume the growth from Americas was driven primarily by consumer and more specifically iCE40 or is there a different way to look at that?

It's not driven by those two things. Sundeep Bajikar - Jefferies & Company: Okay.

Right. Sundeep Bajikar - Jefferies & Company: Thanks so much.

Okay.

Your next question will come from the line of Richard Shannon with Craig-Hallum. Please go ahead with your question. Richard Shannon - Craig-Hallum: Hey Darin and Joe, how are you guys doing.

Good. How are you Richard?

Hi Richard. Richard Shannon - Craig-Hallum: Good, doing fine thanks. I guess its few questions from me I guess just on your guidance for the first quarter if you can help us understand kind of the relative puts and takes both by vertical market and as well as FPJ versus PLD?

Okay, so vertical markets to start with comps. Comps was probably down slightly in Q1 that's what I would anticipate. Consumer is probably flattish to slightly up from what we saw and industrial and automotive I think will be kind of where they were in Q4. So I think Q4 and Q1 are probably consistent. That's kind of muddling word. Then what was your other question, I am trying to… Richard Shannon - Craig-Hallum: Just by FPJ versus PLD?

Yeah, this is going to be interesting. So the PLD stuff it depends on where you have characterized iCE as a PLD or an FPJ right. Richard Shannon - Craig-Hallum: Where do you characterize it?

Well, I think different people will put it in different places. I think it would be characterized more into the PLD. So if I look at that PLD should grow, FPJs will grow dependent on ECB which is a comps product, because ECB3 has been the big growth driver for FPJs. I don't answer it to pay XO2 being you know our newer product in the FPJ market. I don't anticipate XO2 to grow significantly. It will start growing this year, right so lot of these design wins that we had last year should start coming to fruition this year. So the comp stuff or like a lot of the control plan and glue logic stuff for XO2 that should grow as we move through the quarters and that would be that versus CPLD. Richard Shannon - Craig-Hallum: Okay, its fair enough. Here a couple of more questions from me. I guess on the consumer and the mobile space here what does your customer concentration look like specifically within that sector and then how do you expect that to change in the form of revenues throughout this year?

Well today our customer profile is digital still cameras and smartphones. So the customer profile and digital still cameras is actually quite a few people and smartphones it's really dominant by one specific customer and as we move through it there is three or four other dominant people in our customers that we are working with. So our goal is really diversify some of that shipments into more of mobile and we do have some interesting design opportunities and some design wins in some of the other areas, which is what we are focused on, right. So it's really not only focusing on the specific areas that we are winning them, but also taking what we have learned and focusing more on some of the other areas of their customer's, large different customers in the different geographies. And there is geographies there is consumer in the United States, there is consumer obviously in Korea and then there is consumer in Taiwan and China. So there is quite a few different regions that we're targeting today to expand the customer base. Richard Shannon - Craig-Hallum: Okay and how does this put revenues in mobile between cameras and phones today?

Let me think about that. It's probably 20-80. Richard Shannon - Craig-Hallum: 20 cameras?

Yeah cameras?

80.

Yeah, its 80% low, maybe off a little while, but that's what it feels like. Richard Shannon - Craig-Hallum: It's my understanding and you mentioned you have one specific large customer in the phone side there that's kind of cozy platform type of a win. You talked about potential for three or four more customers this year. Are those opportunities for larger volume kind of platform wins or how can you characterize the possible benefit there?

If you look at – you have to kind of look at it in terms of smartphone industry, right. If you look at who the big guys are you could kind of figure out their volumes and you look at the next three to four players and they are smaller than those big guys, but they are still very significant from a revenue perspective. So that's really what we are trying to focus on. So are they big? They are big in relative terms compared to some of the other markets we serve but they are not as big as some of the dominant players in the smartphone market. So they'll add baseline and that's the goal, right. We are trying to add to the base line so you have more diverse through that. Richard Shannon - Craig-Hallum: Okay, fair enough. One last question I mean for Joe. Joe, can you tell us where you sit in terms of your share repurchase plan and what are you thinking about going forward, you are thinking about reloading that, obviously you have a lot of cash and certainly could be doing more on share repurchase if you wanted to. I kind of want to what your forward plans are.

We still have some dollars left in the existing plan and we'll definitely talk with the Board about reloading. We have been using it as an option basically hedge for options dilution and we'll continue with that going forward. Richard Shannon - Craig-Hallum: Okay, perfect. Thanks a lot guys that's all from me.

Sure thanks.

Your next question will come from the line of David Duley with Steelhead Securities. Please go ahead with you question. David Duley - Steelhead Securities: Thanks for taking my question. I think on the last conference call you had given us an iCE number. Do you recall what that was?

An iCE number, I don't know… David Duley - Steelhead Securities: Well, you meant to say 15 million units this quarter. I think you gave us an update last quarter. I was just wondering if you had that number of the top of your head?

Let me say a 10 million number we had past 10 million I believe. David Duley - Steelhead Securities: Right, okay. And just, I think you were just talking about, just to make it clear though. This is the iCE revenue now is mainly with one big handset customer and the goal is to bring three or four iCE customers online over the next year?

It's in the smartphone area. Its more than one customer. It also is sold, iCE being sold into digital still cameras, which with some big design wins that we had and then it's sold into the broad market and that broad market applications are things like handheld GPS all sorts of things like that. I think… David Duley - Steelhead Securities: In the handset market its mainly one customer is that what you are saying?

Its primarily one today and that's what we are changing, that what we are changing through time. David Duley - Steelhead Securities: Okay, can you mention what your 40 nanometer revenue was as a percentage of the total.

Hold on a second I can calculate it. It's probably a little bit more than 10%. David Duley - Steelhead Securities: And that should obviously be one of the rapidly growing metric going throughout the year?

Yeah, especially as we move, as we do a couple of things. One is as we more products to 40 nanometer, which is our plan right. That that you'll start to see 40 nanometer you get to be a bigger part. You'll also see a challenge or a race between 45 and 65 because we do have the comps parts today shipping on 65 and we have XO2 on 65. So you may see, you know you can't just say hey 40 nano versus taking off like a host because you still have other things ramping on all the technologies and then they'll come on 40 nanometer over time. David Duley - Steelhead Securities: Okay, so what other major product lines do you intend to move to 40 nanometer in 2013?

Well we'd be obvious that we would move our – products to 40 nanometer and would obvious that long term we would move some of our market products to 40 nanometer overtime.

But the timing on that is when we see it as a cost effective move.

Right so that's the challenge when you have a lot of people have that thought process that – everything should move to 28 not true, and not everything should move to 40. So what you want to do is you want time your production on 40 nanometer with past the peak of the technology for small die or you actually end up paying more. That's what Joe's alluding to, so there's a time element for us on some of the smaller devices that when I gets cost effective we'll move it until then its more cost effective to do one 65. David Duley - Steelhead Securities: So it's more what the boundary pricing is rather then the size of you were doing?

No it's actually you can say that but its actually little bit less complex than that its when there depreciation on their factory rolls off right I mean you can actually factor in first couple of years, everything is really really expensive, pen–trolley equipment but then by about the third or fourth year on that some of that peak starts to come down so that's the-- David Duley - Steelhead Securities: And generally you have large die so does the math works in your favor because of that might works in your favor because of that

We have small die which gives us delay factor versus our competitors. Right so remember they have the [HIMID-I] that they have to put on 28 and 22 and they've got to invest in leading edge technology we have small die which means we can be a technology behind them and still compete and if we focus on – low power – low cost in the innovation for the markets we serve, you can't do what we do on 28 nanometer, right because it doesn't make any sense? David Duley - Steelhead Securities: Okay, Got you, so two just two quick housekeeping questions, could you just talk about the inventory situation, I think you mentioned you took advantage of wafer pricing I would imagine that means you've built the wafer bank and, if you could talk a little bit about that and the inventory that you see in the channel and then just as a follow-on, could you talk about what positions, as far as a new managers that were hired into the company?

Yeah, sure, okay. So the inventory positions that we did was for two reasons, one is we have to position the consumer inventory model is different than the comms inventory model. So we have to position more product, even though on a unit base it looks high on a dollar base it' not as big, but we have to position products for some of the future ramps which are pretty big. On the comm side of things you want to take advantage of – if you trickle a few wafers through the system your pricing is different and if you just - if you're working with them on the right time. Because maybe they have a low in some of their factory so that can be better pricing so we time some of our volumes to get the lowest possible cost, knowing that there's multiple customers that you don't get stuck with in an inventory position. Right so that's what we did, that in order for us to keep the margins where we do, we try to lower the cost structure on certain products, and other products if you have to focus the inventory so we can handle the demand surges of the mobiles products because those surges are huge. So it's a slightly different model, and we had expected that. And the positions you know as we alluded to we broaden a probably 3 different senior managers for the marketing function one from a product line business plan standpoint which is all of the marketing and we have a vertical called comms and a vertical called consumer and industrial and then medical. So three different people in the marketing organization, well versed and FPJs, I have a lot of experience in FPJs. And then you know that (inaudible) was brought in as our EVP of marketing last quarter. David Duley - Steelhead Securities: Okay, and so just kind of all whole retooling of the marketing organization.

Exactly. Retooling it to be very focused on the market segments and then the overall FPJ market and then putting more focus even on the consumer and mobile and ultra-low density stuff. David Duley - Steelhead Securities: I promise this is the last one, you classify iCE in the, is it a PLD?

PLD. David Duley - Steelhead Securities: Okay.

Which is why our PLD grew quite a bit last quarter between Q3 and Q4. David Duley - Steelhead Securities: That makes so much more sense. Thank you.

Yep, thanks.

(Operator Instructions) Your next question will come from the line of Bill Duzellum with Tieton Capital. Please go ahead with your question. Bill Dezellem - Tieton Capital: Thank you, I'd like to follow up on the inventory question please, given that your guidance is for the first quarter is a minus 2 to minus 4% on the revenue change, and yet you're also telling us that your increasing revenue, increasing inventory in anticipation of customer ramps, that implies, if I should ask it as a question, does that imply that number 1 you already have design wins, that you are building inventory for and number 2, does it also imply that you will be building inventory again in the first quarter in anticipation of the initial ramp.

One might allude to what you do said is true being, I’m not going to build stuff unless I have a home for it. Q1 I would try to build inventory for Q2 and Q3 volume commitment, Q4 is really for Q1 and Q2, so you kind of have to stay ahead of it. So

But you probably won’t see as dramatic a growth in those quarters because of the run rate. Bill Dezellem - Tieton Capital: Let’s see I was following up until that, but the last thing you said Joe, say that please again.

So we grew this quarter in preparation for a ramp. Bill Dezellem - Tieton Capital: Yes.

As we ramp up lead of that inventory will continue replenish, I don’t expect us to drop but I don’t expect us to go up another 7 million exporter of inventory.

Right, so where Joe has gone to it, you have to build up to an initial ramp and then you want to laniaries your way first.

Yeah.

Versus the demand, because once you get up to a point you don’t have that big ramp. And then at that point you’re going to carry the right -- inventory based on the fluctuations, we had to build that up because you are at the beginning of it, once you get there it will set us a standard rate. We’re just pretty close to that rate by the way. Bill Dezellem - Tieton Capital: You are pretty close to that rate right now.

Yeah, so once you get to that point, you’re not going to increase any more, but it may kind of go spike up and down depending on those demands, but when you talk about that, you’re not talking about a huge dollar figure but you are talking about a huge unit figure. Is that initial ramp is that where you started selling product will be happening, I’m trying read between the lines here may be the late first quarter but realistically more in the second quarter, would that be correct where you think about it? That’s subsequently not a bad assumption. Bill Dezellem - Tieton Capital: Okay. And then that may actually be answering now my second question which is that you have referenced that earlier in the remarks is that second half is looking better than the first half and that again comes back to these design wins that you’re building inventory for right now and possibly in future quarters. Right and you also have to look at the total product portfolio not just consumer. So when you look at consumer, you know that’s one thing, but we also have wins in industrial, we have wins in automotive, you know so some of the stuff that we’ve been working on for last 2 years have actually coming into production. The question is really does the macro even help you in some cases we’re beginning to see those ramp that we have credible evidence that those will happen through next years. In another case depending on the macro people will sleep and slide stuff, right that’s kind of we got to look at. So, for today we’re positioning you know, as if that second half and middle of the year better than the first quarter which seems to be kind of attached to Q4 you know if you put it in terms of Q4, Q1 seem to be more of and then you can start to see you know some of the design wins and some of the production dates starting to push to the point where you, okay that’s reasonable that we can get those. So that’s why we made the comment, we think that second half may be better than the first half. Bill Dezellem - Tieton Capital: Even what you have said here in response to my questions and previous questions. Does this imply that there may be enough incremental wins in business in the second half of the year that your fourth quarter may be more flatish rather than sequentially down as it has been as you embark upon this transformation?

We don't typically give guidance way out there because we are not supposed to, but I would argue that as you go through the year if you continue to win in markets that aren't cyclical you will be correct. The issue that we have always been is because 47% or 48% of our business has typically been in comps over the years. We go as comps goes. Those comps are cyclical and drops down in Q4 we do, but if we are broadening our market focus some of the other things like in Q4 we actually did have some offset becoming comps and consumer. So 20% of our shipment was consumer. So it kind of shows that as we grow up on our ULD versus LD space commitment that you would like to have other market segments be bigger so that you don't have that comps effect. Bill Dezellem - Tieton Capital: That is helpful and then and finally in response to an earlier question that was creating a theory as to why North America was up, you said it was not what the questioner had thought. What was the reason that North America was up?

It was up just a little bit, right. And I think a lot of that stuff is just, its not comps, we don't ship a lot of comps into the U.S. For sure we don't ship a lot of consumer yet into the U.S. So it can be just distribution that's driving numbers also as you go through the year. So it's not up substantially so there is nothing I would say. Well there is one effect that has it. I think it is just a fact of the Q3 to Q4 is relatively flattish, because I don't think it's up that much. Bill Dezellem - Tieton Capital: It's up small amounts.

Yeah, dollars stay consistent and then overall revenue drops, so you saw a slight uptick, right. But my comment was really its not consumer. Bill Dezellem - Tieton Capital: Right.

It's just everything else kind of huge stuff. Bill Dezellem - Tieton Capital: That's helpful. Thank you both.

Yep.

Thanks.

At this time there are no further questions. I am just going to turn it over to management for any closing remarks.

Okay, so just to close, we continue to see a lot of benefits from streamlining our Company structure. New products are growing fast. We are making tremendous strides in ultra-low density space primarily in the consumer market and our low density, low cost, affordable innovation commitment resonates with our customers. So thanks again to everybody joining us on the call.

Ladies and gentlemen, thank you for your participation in today's conference call, you may now disconnect.