Gordon W. Parnell - VP, CFO Ganesh Moorthy - EVP Steve Sanghi - President, CEO and Chairman

Harsh Kumar - Morgan Keegan Romit Shah - Lehman Brothers Christopher Danely - J.P. Morgan Uche Orji - UBS Kevin Cassidy - Thomas Weisel Partners Jeffery Rosenberg - William Blair Craig Ellis - Citigroup JoAnne Feeney - FTN Midwest

Please standby, we are about to begin. Good day everyone and welcome to the Microchip Technology Fourth Quarter Fiscal Year 2008 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I'd like to turn the conference over to Microchip's Chief Financial Officer, Mr. Gordon Parnell. Please go ahead, Sir. Gordon W. Parnell - Vice President, Chief Financial Officer: Thanks, Keith, and welcome everyone to our fourth quarter and fiscal year 2008 conference call. And during the course of the call, we will be making projections and other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions, and that actual events or results may differ materially. We refer you to our press release of today as well as our 10-K for the fiscal year ended March 31, 2007, and our 8-K current reports that we have filed with the SEC that identify importance risk factors that may impact Microchip's business and results of operations. In attendance with me today are Steve Sanghi, Microchip's President and CEO, and Ganesh Moorthy, Executive Vice President. I will comment on our fourth quarter and fiscal year 2008 results, reviewing geographic data and discussing balance sheet and cash information, and Steve and Ganesh will then give their comments on the results, outlining our guidance for the June quarter and update other pertinent matters regarding our business. We will then be available to respond to specific investor and analyst questions. Let's begin with net sales for the March quarter, which were $260.4 million, up approximately 3.1% from net sales of $252.6 million in the immediately preceding quarter and up approximately 0.9% from net sales of $258.2 million in the prior year's fourth quarter. Net sales for the fiscal year 2008 were $1.36 billion, essentially flat year-over-year. In earnings per share we are continuing to exclude additional... to include additional information in our press release related to SFAS 123(R). Non-GAAP results, exclude the adoption of this accounting standard and the favorable adjustment related to tax reserves. The earnings per share on a non-GAAP basis were a record $0.42 per diluted share in the March quarter, compared to $0.39 per diluted share in the immediately preceding quarter and $0.37 per diluted shares in the prior year's fourth quarter. Non-GAAP net income for the March quarter was $79.2 million, which was impacted by interest expense associated with the convertible transaction that the company entered into in December 2007. Net income in the March quarter included the full effects of the transaction with net income being reduced by $3.9 million compared to period prior to the transaction. GAAP net income for the March quarter was $76.7 million or $0.40 per diluted shares, inclusive of all share-based compensation expenses and the adjustment related to tax reserves. The impact on the earnings related to the adoption of share-based compensation in the March quarter was 8.9%, and the earnings per share was favorably impacted by $0.02 related to the adjustment on our tax reserves. Our fiscal 2008 non-GAAP earnings per share were up 6.1% to a $1.57 compared to a $1.48 for fiscal 2007. Our GAAP earnings per share were a $1.40 for fiscal 2008 and included share-based compensation which is approximately $0.13 impact; the sale of Fab 3, about $0.08 impact; and the benefit from various tax matters, which were favorable by about $0.05 combined. Geographic... and sales for both the Americas and Europe were up sequentially, while Asia revenues were down in the March quarter, really all in line with our expectations in entering the quarter. Our results regionally reflect the seasonal impacts in our business in these particular territories. Europe grew 15.6% sequentially and the Americas also grew sequentially by 1.6%. Asia revenues were impacted by the Lunar New Year in many of the territories in the March quarter being down 3.8%. Asia continues to be our largest geography, representing approximately 43% of total sales. Europe represented approximately 31% of sales, and Americas approximately 26% of sales. Again this measurement is based on where the product is delivered for manufacturing purposes for our customers, but doesn't necessarily represents where the design activity is taking place, or where the consumption is occurring. Taking a look at operating P&L information, initially I am using gross margin and operating expenses prior to the effects of share-based compensation. Gross margins were at record levels of 61.5% in the March quarter, and operating expenses were 26.8% of sales, compared with the prior quarter, which were at 26.5% of sales. R&D costs were $28.6 million representing 11% of sales. Sales and general administrative expenses were $41.1 million, representing 15.8% of sales. Operating expenses in the quarter were impacted by the continuing weakness of the dollar on expenses in our international locations, as well as higher bonus allocations as a result... of the results... as a result of what we saw in the March quarter P&L. On a full GAAP basis, gross margins including share-based compensation were 60.9%. Research and development expenses and SG&A expenses combined were $76.9 million or 29.5% of sales. The tax rate for the March quarter was 18.8% on a non-GAAP basis and 13.7% on a GAAP basis which included the favorable adjustment that I mentioned related to our tax reserves. A tax rate is impacted by the mix of geographical profits and the percentage of our cash that is invested in tax advantage securities. The dividend that we declared today of $0.33 per share was an increase of approximately 3.1% sequentially, and an increase of 17.9% over the same quarter in fiscal 2007. The dividend payment related to the dividend declared that will be made in the June quarter will equate to approximately $60.9 million. Coming now to the balance sheet, inventories were essentially flat in dollars at a $124.5 million, representing approximately 112 days. This is down two days from inventory levels at the end of December 31st. And deferred income and shipments to distributors was $95.4 million, which was up $2.1 million from the December reported information. At March 31st, distributors were holding about 1.8 months of inventory based on sell-through, down from 1.9 months as of the end of December. And when we combine inventories on our balance sheet and at the distributors, we represent a 145 days of total inventory and this is down four days from December levels. Microchip's receivables at March 31st were a $138.9 million, an increase of $23.9 million or 20.9% from balances as of the end of December. The increase in the balance reflects not only the sequential growth in revenues, but also the back-end leading of revenues in Asia due to Lunar New Year, as well as the transitionary changes in our global distribution network. Payment performance by our customers continues to be excellent with minimum balances beyond terms. In our cash position at March 31st, our cash and total investment position was approximately $1,519 million. During the quarter, Microchip generated net cash flow from the business of approximately $99 million. Payments related to our cash dividend of $0.32 were $60.4 million, and the cash used in our stock buy-back was approximately $173.3 million, representing about 5.5 million shares. Operating cash flow for fiscal 2008 was approximately $476 million and dividend payments for the full fiscal year were $252 million. During the year, we also brought back stock for $1.14 billion, offsetting the net cash received from the convertible transaction of over $1.13 billion. And again that transaction was completed in December '07. We anticipate continuing to build cash operationally in the June quarter, adding about a $120 million in operational cash, prior to dividends and our stock buy-back activities. Capital spending for the March quarter was approximately $20.7 million, and depreciation for March was about $22.9 million. This is versus $27.9 million for the same quarter depreciation wise, and $23.4 million in December of last year. Capital spending for fiscal '08 was $70 million and depreciation for the fiscal year was $98 million. Our capital expenditure forecast is currently $100 million and depreciation forecast is approximately $95 million, both for fiscal '09. Our capital expenditures include approximately $30 million related to the addition of a new building in Thailand in support of our growing assembly and test requirements. I'll now ask Ganesh and Steve to discuss the performance of our business, guidance for the June quarter, and update other business matters. Ganesh? Ganesh Moorthy - Executive Vice President: Thank you, Gordon, and good afternoon everyone. I will now comment on the individual product lines, and starting with microcontrollers. Our microcontroller business was up 4% sequentially. Our Flash microcontroller business meanwhile hit another record and was up 7% on a sequential basis, and up 11% on a year ago quarter basis. Flash microcontrollers now represent 75% of our microcontroller business. Development tool shipments which are one of our leading indicators were very strong with a record 33,472 development tools shipped last quarter. In fiscal year '08, we shipped a record of 116,832 development tools, 39% more than what we shipped in fiscal year '07, and over the 100,000 per year mark for the first time ever. These strong development tools shipments are indicative of the continued strong activity and acceptance of our solutions and should bode well for future growth. Moving to 16-bit microcontrollers, we had another strong quarter with revenue up 12% sequentially and up 90% over the year-ago quarter. We shipped 3,433 16-bit development tools in the March quarter, bringing the total 16-bit development tool shipped to-date to just over 44,000. In fiscal year '08 we shipped a record 20,575 16-bit development tools, almost twice as many as we shipped in fiscal year '07. The revenue growth and development tool shipment results reflect our strong designing momentum across a broad range of customers and applications. New product introductions continued at a torrid pace as we brought 51 new 16-bit products to market in the March quarter, bringing the total number of 16-bit products now in production to 152. Number of 16-bit customers grew by 13...16-bit volume customers grew by 13%, to 1,261 in the March quarter up from 1,117 in the December quarter and the number of customers of all sizes remained in the several thousands. Our 32-bit microcontroller product line continues to make good progress. 4 more new products began sampling in the March quarter [ph], bringing the total number of product sampling to 11. Customer interest remains very high and the industry accolades for this product line continue to come in. And while we expect the designing cycles for the 32-bit product line to be long, we are very optimistic about its contribution to the overall microcontroller growth and leadership position. Finally, in the area of microcontrollers, the Gartner Dataquest just published their microcontroller market share information for the calendar year 2007. The rankings confirm that Microchip remains firmly in the number one position for 8-bit microcontrollers, 24% larger than the number two company. We believe that the slower growth of the business that we experienced in 2007 was purely the result of our higher exposure to the housing and consumer market segments. But the growth and momentum we have seen so far in 2008, we believe we are continuing to gain market share through the combination of our strong product line offering and enhance demand creation initiatives. Moving to analog products, our analog business was up 8% sequentially achieving a quarterly record for revenue, many more opportunities that we have been incubating for some time started [ph] to ramp into production and we see more such designs poised to continue this trend in the coming quarter. We continue to be very encouraged by the level of designing activity and the breadth of customers this activity is occurring and for our analog business. Serial E-squared memory products, our business was down over 6.5% sequentially even though the pricing environment was more challenging, we maintained our discipline of not chasing low [ph] revenue growth. Let me now pass it to Steve for some more general comments and our guidance for the June quarter. Steve? Steve Sanghi - President, Chief Executive Officer and Chairman: Thank you, Ganesh, and good afternoon everyone. Today, I would like to first reflect on the results of the March quarter, then I'll discuss the macro environment as we see it, and finally, I'll provide guidance for the June 2008 quarter. I am very pleased with our execution in the March quarter amidst challenging industry conditions. Our original guidance for net sales for the March quarter was minus 2 to plus 4% sequentially. We achieve near the high end of that guidance with net sales up 3.1% sequentially. We also achieved the high end of our gross market guidance and achieved an all time record high gross margin of 61.5% on a non-GAAP basis. Our original guidance for earnings per share was $0.35 to $0.38 on a GAAP basis and $0.39 to $0.42 on a non-GAAP basis. We achieved the high-end of the non-GAAP guidance and exceeded the high-end of GAAP guidance by $0.02. So, all-in-all, it was a very good quarter in which we resumed growth after two quarters of sequential decline. Now, I will discuss some macro environment as we see it. March quarter continue to validate the scenario that we have been painting for investors. By going into this downturn, two quarters ahead of the rest of the industry, we have left the worst behind us in the December 2007 quarter. Our March quarter was sequentially up and we expected... quarter to be sequentially up too. Many of our competitors have reported revenue declines in their microcontroller business units in the March quarter. This has been consistent with the scenario that we described for the investors where we were more exposed to consumer segment and saw the revenue drop in September and December quarters, while our competitors were more exposed to PC and communication segments and have now seen the drop in the March quarter. Microchip is seeing improving business conditions due to our own superior demand creation efforts. This goes back to 2.5 years ago, when we hired 150 direct sales and field application engineers working directly for Microchip, and we changed our business model with the global distributors especially Arrow Electronics. Some of the commentary we have seen about this change does not reflect an understanding of the reason for the change or appreciate the positive effects of these changes on our business. We believe that these authors have completely missed the tremendous positive effect of 150 direct sales and FAEs and a number of regional distributors we added who have been much stronger demand creators than Arrow ever was. The result of all this is that we have a very strong design in pipeline that we've have been incubating for some time. They are just starting to ramp into production and there are many more designs that are right behind in the next one to two quarters. We did not want to share the fruits of our own labor with Arrow, who has largely acted against us in the last two years. Therefore during the last quarter, we have terminated our relationship with Arrow. We have transferred all of that business in either Avnet Mamec, Avnet Silica or Future Electronics or one of our regional distributors. In the process, we have gained significant additional demand creation resources from Avnet and Future Electronics. We expect that there will be no negative effect of Arrow's termination on our business short term and there would be tremendous positive impact to longer term. While the result of these additional demand creation resources from Avnet and Future will be seen in four to six quarters from now. We are seeing the results of resources we added two years ago now. Our book to bill ratio for March quarter was 1.06. Our starting backlog for June quarter was 8% higher than our starting backlog for March quarter. We completed, almost completed really on our mark to finish our April as the best ever first month of the quarter in bookings. We are starting to see lead times on certain products push-out by week to week, and we are seeing very large number of expedites from the customers. We increased wafer starts in our fabs in March first time in the last nine months and we are preparing our assembly and test facility for the foreseeable rents. We're also mindful of continuing challenges in the U.S economy and its possible affect into the global economy. Taking all that into consideration and after our comprehensive review processes, we expect our net sales for June quarter to be 2% to 6% sequentially. Our growth is driven by strategic product lines. We expect 16-bit microcontrollers to be up 12% to15% sequentially in the June quarter and analog to be up 8% to 12% sequentially in the June quarter. We expect to achieve another record growth margin of about 61.6% to 61.75% on a non-GAAP basis. Now the earnings per share calculation has several moving parts. The dramatic reduction of interest rates from the Fed in March knocks a penny out of our earnings per share from the March quarter base-line. And we have assumed another rate cut after the Fed meeting this week which will affect EPS by another half a penny or so. These effects of lower interest rates are somewhat negated by 5.5 million shares of stock purchased in the March quarter which will have full effect in this quarter. On GAAP EPS the results will one time effect in March quarter which positively impact in March quarter GAAP EPS by $0.02. This does not repeat in the June quarter and with stock price moved above the strike price for $1.15 billion convert, it adds approximately 1 million shares to the share count. So taking all that into account, our non-GAAP EPS is expected to be $0.43 to $0.45 which is in the record territory and our GAAP EPS is expected to be $0.39 to $0.41. With that, Keith, would you please poll for questions? Question And Answer

Certainly. [Operator Instructions] We'll go first to Harsh Kumar with Morgan Keegan. Harsh Kumar - Morgan Keegan: Hey, Steve and Gordon congratulation guys, tremendous numbers and guidance. Just one quick question, Steve, could you give us an idea of perhaps by end markets, where are your backlog in orders of the strongest? Thank you. Steve Sanghi - President, Chief Executive Officer and Chairman: Harsh, basically with 60,000 customers worldwide, we no longer break that out. Lot of our customers are multi-national customers were build perhaps in all different types of products, consumer, industrial and other, with 65% or 62% of our business really being from distribution. It's very difficult to get the mix of where that product is going. So therefore, we really do not have any further commentary on end market mix. Harsh Kumar - Morgan Keegan: Got it. Thanks. I will come back later. Thank you.

We go next to Romit Shah with Lehman Brothers. Romit Shah - Lehman Brothers: Yes, thanks a lot. Just I wanted to clarify first, was Europe up 16% sequentially? And if so, how do you guys get comfortable that the customers in that region are not getting ahead of themselves? Ganesh Moorthy - Executive Vice President: Yes, it was up 15.6% sequentially. This is always a very strong quarter of growth for Europe. Coming off the heels of the December where it is extremely negatively affected by the seasonal impact translates into this type of performance in our business. We are certainly mindful over customer base in Europe and as we compare the information we have available to us and consult it with our sales and channel partners, in Europe we have taken that into consideration in terms of our guidance for the coming quarter. Romit Shah - Lehman Brothers: Okay, great. And just a follow-up on the convert, Gordon, can you just explain how the math works now that the stock is above the conversion price. What's the dilution to the share count as the stock theoretically move higher? Gordon W. Parnell - Vice President, Chief Financial Officer: Well, as it moves above the strike price, first of all, you have to remember that this is an instrument that is settled in cash and is treasury waiting for... beyond that. So, it is the same treasury we think that is evident in EPS calculations related to our issue and stock options. We will continue to give the Street guidance on this, as we move forward to at least keep you in tune with what we see in terms of that dilution. If you have any modeling, as you go forward, you can see some of the impact obviously moving above the $34 and change conversion price. Obviously, we don't know where the stock price is going to land. Hence, we've given some level of a range in our guidance in the... in looking forward area of our press release. Romit Shah - Lehman Brothers: If we assume like a $40 stock price, would that add about 4, 5 million shares? Gordon W. Parnell - Vice President, Chief Financial Officer: Not as high as that, I have to go, do the math offline. But I don't think it will take it up quite that high. Romit Shah - Lehman Brothers: Okay, alright. Steve Sanghi - President, Chief Executive Officer and Chairman: The share count, it goes up [ph] very, very slowly. This is unlike a regular five year convert type where once it moves above the strike price, essentially you start looking at as converted and all the shares go back in. This is a 30 year convert, where the investor is having no right to ever put the stock back to us. So, it really accretes very, very slowly at the denominator [ph]. Romit Shah - Lehman Brothers: Okay. Thank you. Steve Sanghi - President, Chief Executive Officer and Chairman: Yes.

We go next to Chris Danely with J.P. Morgan. Christopher Danely - J.P. Morgan: Thanks guys. Hey, Steve, you gave a nice breakout of what you expect the relative growth rates from your different product lines through this quarter. Can you just talk what you would expect in terms of the product lines for the fiscal year in terms of relative growth rates? Steve Sanghi - President, Chief Executive Officer and Chairman: The fiscal year past or fiscal year coming? Christopher Danely - J.P. Morgan: The one we are coming up on. Steve Sanghi - President, Chief Executive Officer and Chairman: I don't have that long-term guidance. We don't really ever give one year guidance, and to break it out by further product line, I can't. I would just venture to get that 16-bit will continue to do the kind of sequential growth we just talked about. And then you can model it your self. Analog is doing also quite strong, has legs on it, and that also could continue to do the kind of growth we talked about. Christopher Danely - J.P. Morgan: Okay. And it is my follow-up. Can you just compare in contrast the linearity of the March quarter versus the June quarter? Steve Sanghi - President, Chief Executive Officer and Chairman: March and June quarters are Christopher Danely - J.P. Morgan: So How are the bookings in March? Were they stronger at the end or beginning, and then how much of the June quarter is going to be done during the month of June, is it very back-end loaded? Steve Sanghi - President, Chief Executive Officer and Chairman: Well there was... March quarter bookings at the end were very strong. March bookings were absolutely very, very strong. April bookings were even stronger heading for an all-time record for the first month of the quarter. June quarter is fairly a normal quarter where we have Chinese New Year in the middle, it is another Europe shutdown like August. It doesn't have a Christmas or Thanks Giving. So, this is the most normal quarter anyway. Gordon W. Parnell - Vice President, Chief Financial Officer: Yes, yes, it's okay. So, March linearity... the month of March was a higher component of linearity based on the Lunar New Year. June is pretty much marched on the week. Steve Sanghi - President, Chief Executive Officer and Chairman: So, this quarter will be rather linear than last quarter. Christopher Danely - J.P. Morgan: Okay. Thanks.

We go next to Uche Orji with UBS. Uche Orji - UBS: Can you here me?

Yes sir, your line is open. Uche Orji - UBS: Thank you. Steve and Gordon, I must congratulates you on these numbers, but let me just look at Q1 guidance again. First of all, I think if I looked at it guess historically, Q1 you tend to grow roughly around 6% sequential. So, when I look at your guidance of 2% to 6%, was commendable in this environment, I kind of think it's... the midpoint is below. Now, if given that Steve, you have been spot and calling the way things are turning, is it fair for us to assume that you feel very cautious on environment even though you have called the bottom for your stock. And if I look at it in context of it you totaled [ph] 10% growth for your company, annually, should I... how will I try to consolidate? And in the final what do you think it's limiting growth beyond just the current macro availability [ph]. That's probably my first question. Steve Sanghi - President, Chief Executive Officer and Chairman: Well you have put three or four questions in there. Let's try to sort that out. Uche Orji - UBS: Sure. Steve Sanghi - President, Chief Executive Officer and Chairman: First thing you said that our normal June quarter is a 6% growth? Uche Orji - UBS: Yes. Steve Sanghi - President, Chief Executive Officer and Chairman: I think your data is wrong, because I don't recall, last year it was 2%, I don't recall the number year before. We probably haven't done a 6% sequential growth quarter in quite a while. If you do a 6% growth in a single quarter, there would be very, very high growth for the company. And where the markets are growing these days, 6% growth in one quarter would be exceptional growth not lower than the usual. So, I don't really agree with assessment. The second part of your question was, are we being conservative? I don't really know. I think the end results would tell what we were. My feeling is, no matter what guidance we gave over the course of the quarter, as we see a lot of investors. Some push for, why the guidance was so conservative and other push for why the guidance was so high, what's happening in the consumer segment with the headwinds, what's happening in Europe, but Uche your question was really leaning towards that with 15.6% in growth in Europe, are you comfortable Europe is okay. So, this is where we came out after substantial discussion and looking at a lot of data. And rest of it, you get to make the call what you want to believe. Uche Orji - UBS: Just one more question. If I wanted to specifically push on that, on the market share. You're referring to government data and of course you are number one at [ph] 16%. But we have seen a few competitors grew quite fast if I look at those like Cypress for example, and even a couple of the Japanese, can you just give me a sense of what you're seeing within the competitive market? I mean the data you cited, the companies that grew very strongly, there are a couple Japanese names and of course Cypress has improved about 84% year-on-year. So what can you say about the competitive environment even though you're since already number one. How do you assess your position and especially in the light of what we're seeing from some of the Japanese competitors bouncing back and obviously Cypress? Steve Sanghi - President, Chief Executive Officer and Chairman: Well, I can't pick and choose products in areas where in a narrow product line, you can really grow. We grew over 100% fiscal year over fiscal year in a 16-bit micro, and I can quote that too. And you can go try to compare with somebody who got a $1 billion dollar 16-bit business and ask him the question, how come Microchip is growing so fast from a small base and a narrow product line, you can't. If I look at Microchip's growth in certain portions of the 8-bit market and I wouldn't spell out what those portions are for comparative reasons, we had 80% plus growth in certain segments. We consider Cypress as a fairly narrow competitor, where majority of the businesses is in the Tucson's area. That's one area they have really done well. But, in that area plus many other areas, we are growing very, very high, but only $1 billion dollars of Microchip business, you don't get the airtime on a specific segment where we are growing 80%. We run out of time by the time we have talked about the broad beach [ph] front that we're trying to defend, a $1 billion dollar going forward. But otherwise, we have plenty of segments where we're gaining significant market share and where the businesses are going 50%, 60%, 80% and even 100% a year. Beyond that, the company you mentioned was down sequentially, what 30% in this quarter, quarter-over-quarter. So, you could have a single large customer drive the business significantly higher, then take a 25% to 30% sequential drop, Microchip's business has never done that. We have built our business very consistently dividing our business in a very broad array of customers. Top ten customers won't make up 10% of our business, and that's the thing that investors have come to accept from us, significant, predictable results. We had couple of quarters of problems last year, driven by unusual things happening in the consumer and the housing market. We got past that and our business is doing quite well now. Gordon W. Parnell - Vice President, Chief Financial Officer: And Uche on the Japanese guys, if you go and look in history, these guys have very high market share in Japan. And in the years in which the yen strengthens, they will report much higher dollar term revenue, and in other years, they don't. Just go and look at the last four or five years for those same companies. So it has a lot more to do with the high presence in Japan, and the change in the exchange rate than it has to do with your market share performance on a day-to-day basis. Ganesh Moorthy - Executive Vice President: And that translates to several of our European competitors, also exactly the same, comment, the weakness of the dollar translates into the reporting stronger Dataquest information, because they tend to be Euro-based and have a higher percentage of their business in any case in their own sphere of influence. Steve Sanghi - President, Chief Executive Officer and Chairman: We believe the entire market growth in microcontrollers as reported by SIA can the accounted for currency change in Europe and Japan, and there was really no real growth, if you were to really go back to the original currencies. Now that's for somebody else to verify but I've seen data to that regard. Uche Orji - UBS: That's very helpful because I was wondering when the Japanese just decide to bounce back very strongly. Steve Sanghi - President, Chief Executive Officer and Chairman: Its share to Japanese in any of our server markets anywhere in the world. Uche Orji - UBS: Alright, maybe we can it offline possibly, and if I look at the data June '06 you did 6% and '05 and 5%, 11% in '04. So that's what I was referring, but I will figure offline with you. Thanks for your answers. Steve Sanghi - President, Chief Executive Officer and Chairman: Okay.

[Operator Instructions] We will go next to Kevin Cassidy with Thomas Weisel. Kevin Cassidy - Thomas Weisel Partners: Hi, thank you, and congratulations on a great quarter. Your growth in analog, it's the first time you've grown in about a year, can you say is it related to new designs went into production or is it... how much of it is attached to new microcontroller designs? Steve Sanghi - President, Chief Executive Officer and Chairman: Well it's all related to lot of new design wins and I think the answer really goes back to what I described as really creating demand creation resources. We were with a structure before where a company like Arrow Electronics essentially had every single analog company they sell for. And we couldn't get share of mine [ph] being a small analog business. We couldn't get the share of mine [ph] in microcontrollers either, they were basically... the way to go to market was really whosever product customer wanted to use they simply sold their product versus truly selling the benefits of our products. So, when we added 150 sales and application engineers ourselves, a portion of those people added were analog experts in various different geography, application engineers which will engage with customers selling the benefits of our products. And with the design cycles and all that you are seeing really it's a result now with a lot of tailwind and you'll see that in this quarter, last quarter and the coming quarters is really we are back to growth. Kevin Cassidy - Thomas Weisel Partners: Okay, so some of these analog designs then aren't necessarily attached to microcontrollers, they are standalone designs. Steve Sanghi - President, Chief Executive Officer and Chairman: Well, many are, many aren't, we don't really break it any more. I've described on this call before, we deployed a three phased strategy on analog, the first phase of our strategy which we implemented back in 2001 was to focus around our microcontrollers and try to attach analog products to the microcontrollers. The second phase is the strategy, which we started two, three years after the first phase, was now to start selling analog broadly into any microcontrollers. So if we didn't win the Microcontroller Socket, Freescale or Atmal [ph] or somebody else won it, we still going to be able to sell our analog. So we started to sell analog much more broadly into the general microcontroller market. And that one was quite successful. And the third phase of the strategy was to sell analog anywhere and everywhere in direct competition with TI, Linear, Maxim, ADI and smaller players. So, right now all three elements of the strategies are functional, and so therefore we don't really break it out what portion is attached versus not. Kevin Cassidy - Thomas Weisel Partners: Okay, and if I could ask one other question about the 150 new sales and FAEs you had, where are they deployed, percentage wise, can you say Asia, Europe and North America? Steve Sanghi - President, Chief Executive Officer and Chairman: Well, after ten quarters I took the courage to tell the people, how many they were. I wouldn't want to provide any further breakdown and I didn't want to provide that because of competitive reasons, but I happen to do it because I think people on the call needed to understand where the growth is coming from in a very bad economic environment and how the change with Arrow affected and what we did and this is really what we did. Now, I am not going to further break it down regarding how many were sales or FAEs and what regions we deployed them. Kevin Cassidy - Thomas Weisel Partners: Okay, thank you very much. Steve Sanghi - President, Chief Executive Officer and Chairman: Welcome.

We'll go next to Jeff Rosenberg with William Blair. Jeffery Rosenberg - William Blair: Hi, you understandably sounded more cautious about the North American market versus the rest of the world, specifically can you talk about your expectations sequentially in June across certain geographies? Steve Sanghi - President, Chief Executive Officer and Chairman: We don't breakout the expectation further by geography; I did not mean to sound more cautious on North America, we have absolutely... the thing with North America is nothing really books here, so lot of the growth we are talking about, a good portion of it is coming from North American customers, but they are all buying in China. So, as we report the numbers like our last quarter growth in Americas was 1.6%, but that's really not real. I mean it's really... it's a customers who does the design in San Jose then buys the product in China. We report that into the growth in China, and that's really not right. There is just no other way to do it that's the only simplest way to really report at where the product was shipped, because the rest of the analysis is very difficult. So, no, we are not saying that the growth is not coming from U.S., lot of it is. Jeffery Rosenberg - William Blair: Okay and Steve Sanghi - President, Chief Executive Officer and Chairman: Pre-designs. Jeffery Rosenberg - William Blair: And if you look at the things that a year ago... and I realize this is several quarters back that were more on a drag, are they pretty stable right now and no real noticeable differences in terms of the various customers that you rolled together and those indices you provided us when you give clarity on the weakness in the North American market. Is that whole segment pretty much in line with the rest of your business at this point or is there still a little bit less growth their then elsewhere? Steve Sanghi - President, Chief Executive Officer and Chairman: Well, there is less growth there, there is no growth there. You are referring to the U.S. housing index. I stopped reporting the U.S. housing index. As I had originally said I was only going to do it for a couple of quarters, because a lot of moving path, designs go away, new designs come in, you want to a brand new design so the dollar numbers look higher. But that doesn't really mean that segment is stronger, but without giving you the number, the U.S. housing index was minutely up. Jeffery Rosenberg - William Blair: Okay. Steve Sanghi - President, Chief Executive Officer and Chairman: Slightly up. Jeffery Rosenberg - William Blair: Okay, thanks

We will go next to Craig Ellis with Citi. Craig Ellis - Citigroup: Hi, thanks, nice job on the quarter guys. The first question is really a clarification. Steve, you mentioned that you are seeing some lead time stretching out and an increase in customer expedites, can you comment on how broad-based that is? And given the general concerns that we all have about the macro backdrop, do you think that's due to particular end market seasonality, the distribution model changes that the company has made in the past that are now starting to bear fruit or what's driving that increase? Steve Sanghi - President, Chief Executive Officer and Chairman: I think it's a combination of lots of different factors, I'm not sure there is anything to do with the distribution model change, there is, the total amount of inventory left at arrow on the way to being returned is of the order of what? Gordon W. Parnell - Vice President, Chief Financial Officer: 3.5 million. Steve Sanghi - President, Chief Executive Officer and Chairman: $3.5 million. Gordon W. Parnell - Vice President, Chief Financial Officer: In DC currency, so. Steve Sanghi - President, Chief Executive Officer and Chairman: So in the grand scheme of things, the amount of inventory which is really, on its way to being return. Therefore not being put to active use is really very, very small, we'll easily be able to replace that, if that was not available. So, it's really not driven by that. I think customers have gotten used to very short lead times. The product has been immediately available, nobody wants to commit anything, nobody wants to forecast anything. So, typically that's why in the entire industry, the visibility have been very low. And we reported our starting back lock was 8% better. So, we were getting strong orders for a [ph] near term product got booked because of those strong orders. So, now the customers who did not place their order wanted the parts like tomorrow, and they are being told they had to wait two weeks. So, that's the kind of thing we are talking about. Craig Ellis - Citigroup: Okay, that's helpful. And then a longer term question. It looks like we've got pretty clear visibility toward the company getting to its cross margin target of 62%, but it seems like it's a longer gap to the operating margin target of 37 to 38%. Can you help us calibrate how we should think about the timing with which, how the company feels it can get to its operating margin target? Steve Sanghi - President, Chief Executive Officer and Chairman: The operating target margin we have shown recently has been 37%, approximately, 62% gross margin, non-GAAP by the way, 25% operating expenses non-GAAP, which will give you 37%. Where we are still farther apart is really on the operating expense line. We just reported a quarter at 26.8% non-GAAP, so we're 180 basis points away and the difference really has been not on the expense side but on the denominator, on the revenue side. With two quarter of decline of revenue that we saw last year, it really put that number in the negative direction. We were in the range of 25-25.5 before that, so we were lot closer. And if we had made the gross margin improvements and had not slipped back on the operating expense percentage we'll be in the striking range of that. Considering where we are, and it needs some good revenue growth for I would say six to eight quarters, to really get the operating expenses back in line. Craig Ellis - Citigroup: Okay, thanks Steve.

We'll go next to Craig Hackenbach [ph] with Goldman Sachs.

Yes, thank you. You mentioned that orders had jumped around a bit in Asia around the Lunar New Year, can you just discuss the other geographies of North America and Europe, how the orders progress through the March quarter? Ganesh Moorthy - Executive Vice President: They performed well. We saw a good coverage in terms of our expectation on both our direct channel and our distribution network and that's continued into April also. So, no real surprises from that perspective they came in with decent linearity and obviously supporting the results we are delivering here.

Thank you. And just as a follow-up, I know you are not breaking out business by end markets, but do you have any comment... commentary around the comm end market in terms of some trends you are seeing within the comm space. Steve Sanghi - President, Chief Executive Officer and Chairman: Comm space... that's the lowest exposure end market for us. Historically when we broke those numbers down comm was the smallest segment for Microchip for screen to battery charges for cell phones, and some coin phones and feature phones, and other stuff. That was the smallest segment for us and we have no further commentary on it.

Thank you.

We'll go next to JoAnne Feeney with FTN Midwest. JoAnne Feeney - FTN Midwest: Yes, question about your auto efforts. I know that's a relatively new area for... and I am wondering if you could comment on how that's progressing? Steve Sanghi - President, Chief Executive Officer and Chairman: Auto is not a new area for us. We have been in auto business for over a decade. And when we were breaking out the numbers, auto was approximately 18% of our business. JoAnne Feeney - FTN Midwest: And how was that... how have you seen that change over the last quarter, is that something that's picking up? Steve Sanghi - President, Chief Executive Officer and Chairman: There is no significant thing to report, like... we don't really break out the end market anymore. Auto didn't show anything positive to say or negative to say. JoAnne Feeney - FTN Midwest: Okay. And then just a housekeeping, couple of questions. Can you give us a breakdown of your interest income and your interest expense for the quarter? Gordon W. Parnell - Vice President, Chief Financial Officer: I can't at the moment, just go to your next question. JoAnne Feeney - FTN Midwest: Okay. And then on the gross margin a bit, following up on a previous question. Over the next several quarters, what do you see as the potential drivers for further improvement in gross margins? Steve Sanghi - President, Chief Executive Officer and Chairman: Well, we have you know guided longer term gross margin non-GAAP to be 62. We are guiding for the current quarter about 61.6 to 61.75. So, you got another 30-35 basis points left. The drivers are same that they have been for number of years now. There is higher volume, so better absorption, depreciation, roll-off, we are adding new capital slower than the old capital is depreciating. The richening product mix, higher percentage of the business being flash, higher percentage of business being analog, higher percentage of the business being microcontrollers, slower growth in memory, just lots of margin in. JoAnne Feeney - FTN Midwest: And then in terms of your relatively new relationships with Avnet and Future. I am wondering when do you see design creation activity with them really picking up? Do they have a lot of learning to do, in other words, in order to play a stronger role for you in that regard? Ganesh Moorthy - Executive Vice President: Well, our relationship with Future is not new. Prior to this change, they were our largest distributor. The relationship goes back 18 years, so. JoAnne Feeney - FTN Midwest: No, on the Avnet side though? Ganesh Moorthy - Executive Vice President: So, Avnet is newer relationship. We are in the process of training all these people now and like I said in my commentary, the new designs it will create will take about six quarters to revenue, but between now and six quarters lot of the growth from the 150 people that we added, 2, 2.5 years ago and large number of regional distributors we added back then which tool their 6-8quarters and lot of the revenue showing now. JoAnne Feeney - FTN Midwest: Okay. And any progress on the interest income or interest expense numbers? Gordon W. Parnell - Vice President, Chief Financial Officer: Yeah, the income is $12.1 million and interest expense is $6.3 million and the interest expense is all related to a convertible transaction and will continue at those rates as we go forward. The interest income is obviously determined by cash balances and safe fund interest rate changes that may effect our investment elements. JoAnne Feeney - FTN Midwest: Okay, thanks. That's all for me.

We will go next to Eric Kobayashi Solo [ph] with Morning Star.

Hi, thanks for taking my call. Just wanted to go back to operating expenses for a moment. I am looking at the GAAP OpEx and noticing that they are growing a little bit faster than your revenue grew in the quarter. I wonder is there something there seasonally or is there some extra color to that? Steve Sanghi - President, Chief Executive Officer and Chairman: Well, the operating expenses sequentially from December to March quarter non-GAAP went from, I believe, 26.6% to 26.8%, 20 basis points. The entire amount was really driven by higher conversion in dollars from our expenses in euro and yen and Chinese and other currencies, and there was a little bit effect of higher reserve of the bonuses because March quarter was a lot better quarter, sequentially up, than December quarter was. December quarter was sequentially down. So, a little bit of higher bonus reserve, but large portion of it was really all currency changes.

I see. And I just wanted to ask a question about the 16-bit line. I wonder, are you seeing strong competitive response from some of the larger competitors against... if you compete against one of their divisions. I just wonder as you move into the 16-bit and 32-bit products whether or not these companies are fighting harder to keep your out? Ganesh Moorthy - Executive Vice President: Our competition never has been easy to get share away from. So whether it's 8-bit, 16-bit, 32-bit, competition is always been hard and we expect that. We see that on our 8-bit, on our 16-bit. So nothing different from what we would expect in terms of competition.

Thanks very much, and congratulations on a good quarter.

And ladies and gentlemen, we will take one final question from Harsh Kumar with Morgan Keegan. Harsh Kumar - Morgan Keegan: Hey, I'm good. Thank you. All my questions have been answered. Steve Sanghi - President, Chief Executive Officer and Chairman: Thank you very much.

Thank you. At this time, this does conclude today's question-and-answers session. I'd like to turn the conference back to your speakers for any additional or closing remarks. Steve Sanghi - President, Chief Executive Officer and Chairman: Well, thank you very much for joining us on this conference call. And there are a number of investor financial conferences we will be going to this quarter, and we will see you, some of that on that circuit. The next time conference is actually where Gordon is going to Merrill Lynch conference. Gordon W. Parnell - Vice President, Chief Financial Officer: Merrill Lynch on present on Tuesday. Steve Sanghi - President, Chief Executive Officer and Chairman: Thank you very much. Gordon W. Parnell - Vice President, Chief Financial Officer: Thanks.

Ladies and gentlemen, this does conclude today's conference. We appreciate your participation. You may disconnect your phones at this time.