Steve Sanghi - President and CEO Gordon Parnell - CFO Ganesh Moorthy - EVP Eric Bjornholt - VP of Finance

Doug Freedman - American Technology Research John Pitzer - Credit Suisse John Barton - Cowen & company Chris Danely - JPMorgan Harsh Kumar - Morgan Keegan Ray Rund - Shaker Investments Uche Orji - UBS Craig Ellis - Citi Romit Shah - Barclays Capital Craig Hettenbach - Goldman Sachs

Good day everyone, and welcome to this Microchip Technology fourth quarter fiscal year 2008 financial results conference call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Microchip Technology's President and Chief Executive Officer, Mr. Steve Sanghi. Please go ahead, sir.

Thank you, [Jerril]. Good afternoon, everyone. During the course of this conference 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, 2008, and our 8-K current reports that we have filed with the SEC, that identify important risk factors that may impact Microchip's business and results of operations. In attendance with me today are Gordon Parnell, Chief Financial Officer, Ganesh Moorthy, Executive Vice President, and Eric Bjornholt, Vice President of Finance. During the quarter, we, together with ON Semiconductor, made an offer to purchase Atmel Corporation for $5 per share. In this transaction, Microchip will sell the nonvolatile memory, RF, and auto business segments of Atmel to ON Semiconductor. Microchip also intends to sell the ASIC business segment to a third-party. Microchip will therefore keep the microcontroller business segment of Atmel. As of this conference call, we have not received a response from Atmel, either publicly or privately. Microchip is very committed to completing this transaction, and will keep all of its options open based on Atmel’s response. We announced the retirement of Gordon Parnell, and appointment of Eric Bjornholt as a Chief Financial Officer, effecting the beginning of calendar 2009. This transition of CFO will continue as scheduled. However, Gordon Parnell has decided to stay with Microchip, and has accepted a newly created position as Vice President of Mergers and Acquisitions, reporting directly to me. Disappointment will extend to Microchip's management bandwidth as we take on the Atmel acquisition to which we remain extremely committed. I would like to thank Gordon Parnell for his excellent financial stewardship of Microchip during which he built significant trust with investors and analysts. I also want to thank Gordon for accepting the new position of Vice President of M&A. His experience and background at Microchip will be of tremendous advantage in this role. I also thank Gordon for training his replacement, Eric Bjornholt, and I look forward to working with Eric. And now, I will pass this call to Gordon Parnell.

Thanks, Steve. I am very pleased to be staying with Microchip and very excited about my new responsibilities and hope to continue to deliver significant value to the business, to my focus in these areas. Let's get on with the call information today. Eric and I are going to be commenting on our second quarter fiscal year 2009 results. We will review geographic data, discuss our balance sheet, and cash information, and Steve and Ganesh will also give their comments on the results and outline our guidance for the December quarter and update other matters that are pertinent to our business. The four of us will then be available to respond to any specific investor and analyst questions. Our net sales for the September quarter were at record levels $269.7 million, up approximately 0.6% from the sales of $268.2 million in the immediately preceding quarter, and up approximately 4.3% from net sales of $258.6 million in the prior year's first quarter. In earnings per share, we are continuing to include additional information in our press release related to share-based compensation, SFAS 123(R). Our non-GAAP results exclude the effect of the adoption of this accounting standard and also a charge related to the sale of Fab 3, which was in the second quarter of fiscal 2008. Our earnings per share on a non-GAAP basis were a record $0.45 per diluted share, an increase of 2.7% from $0.44 per diluted share in the immediately preceding quarter and an increase of 18.8% from $0.38 per diluted share in the prior year's second quarter. GAAP earnings per share in the September quarter were $0.41 per diluted share, inclusive of all share-based compensation expenses, and the impact on earnings related to share-based compensation was approximately 8.3%. Geographically, Asia’s revenues were up sequentially, while both Americas and Europe were down in the September quarter. Asia continues to improve their revenues effectively in the September quarter, growing 6.3% sequentially, while the Americas and Europe were impacted by economic and seasonal factors in both territories, resulting in those regions being down sequentially, 2.3% and 6.2% respectively. Asia continues to be the largest geography for Microchip, representing approximately 48.9% of total sales. Europe represents 27.1% of sales and the Americas approximately 24% of sales. This measurement is based on where the product is delivered for manufacturing purposes for our customer's needs, but does not necessarily represent where the design activity is taking place, or where the consumption is occurring. Operating P&L levels, as I mentioned, FAS 123R expenses are excluded from our non-GAAP Information, and this is initially where I will report. Our gross margins were 61.62% in the September quarter, establishing new record levels. Our total operating expenses were 26.2% of sales, compared with the prior quarter, which was 26.4%. Research and development costs were $28.7 million representing 10.6% of sales. Sales and general administrative expenses were $41.8 million, representing 15.5% of sales. Both the areas of operating expenses made modest improvements compared to the prior quarter. On a full GAAP our gross margins including the share based compensation, were 60.9%, and total operating expenses were $77 million, or 28.5% of sales. The tax rate for the September quarter was 18.1%, both on a GAAP and a non-GAAP basis. Our tax rate is impacted by the mix of geographical profits and the percentage of cash that is invested in tax advantage securities. The dividend that we declared today, of $33.09 per share, was an increase of approximately 9.4% over the same quarter in fiscal 2008. And the dividend payment associated with this declared dividend will be approximately $62 million that will be paid out in the current quarter. I will ask Eric to walk you through the balance sheet information for the September quarter, and other related items. Eric.

Thanks, Gordon. I have been very fortunate to work with Gordon Parnell over the past 13 years, and I'm honored to follow in his footsteps and become Microchip Technology's CFO in January. I also appreciate the opportunity to participate in today's call, and I am looking forward to meeting many of you in coming months. I will be reviewing some of Microchip Technology's key metrics today. Inventories on Microchip Technology's balance sheet were $126.8 million representing approximately a 110 days after the end of September. Deferred income on shipments to distributors was $103.5 million, up by $6.4 million from the balance in June. At September 30th, distributors were holding 35 days of inventory. The combined inventory in our balance sheets and our distributor’s represents a 145 days of total inventory, similar to the inventory levels as of the end of fiscal 2008. At September 30th our receivables were a $120.9 million, a decrease of $14.9 million or 10.8% from balances as at the end of June. The reduction of receivables reflects excellent collections performance with shipment linearity in the quarter. Customer balances beyond terms are at very low levels. As of September 30th, Microchip’s cash and total investment position was approximately $1.519 billion. During the quarter, Microchip generated net cash flow from the business of approximately $129.4 million. Payments related to our cash dividends of $33.08, were $62.2 million and the cash in our stock buyback activity was approximately $100.3 million. We anticipate building approximately $85 million to $95 million in operational cash in the December quarter prior to dividends and stock buyback activity. Capital spending was approximately $46.3 million for the September quarter. Depreciation expense for the September quarter was $23.9 million versus $25.4 million for the same quarter last fiscal year, and $23.2 million in the June quarter. Our capital expenditures forecast is currently $115 million, and appreciation forecast is approximately $95 million for fiscal 2009. The capital expenditures forecast includes approximately $35 million, relating to the addition of a new building in Thailand, in support of our assembly and test requirements, and a new building for R&D and support operations in India. I will now, ask for Ganesh to give his comments on the performance of the business in the September quarter. Ganesh?

Thank you, Eric, and good afternoon, everyone. I will now comment on the individual product lines. Let’s start with microcontrollers. Our microcontroller business was essentially flat on a sequential basis and was up over 5.5% from the year-ago quarter. Our flash Micro controller business meanwhile hit another record and was up over 2% on a sequential basis, and up 14% from the year-ago quarter Flash microcontrollers now represent over 77% of our micro controller business. We are on pace to ship over 1 billion microcontrollers in calendar 2008 and expect the 7 billionth cumulative microcontrollers shipment to occur sometime in December of this year. Moving to development tools shipped, we had another record quarter with 35,282 development tools that were shipped in the quarter. This is the fourth consecutive quarter of record development tool shipments, and we also shipped our 700,000 cumulative development tools in the quarter. Both of these milestones are indicative of continued strong design and activity, and acceptance of our solutions. That should bode well for future growth. Our 16-bit microcontroller business had another good quarter and achieved record revenue as well. Revenue was up approximately 17% sequentially and up 76% from the year-ago quarter. We shipped 5,069 16-bit development tools in the September quarter, bringing the total 16-bit development tools shipped to-date to 53,310. The revenue growth and the development tool shipments results reflect our continued strong design win momentum across the broad range of customers and application, and the number of volumes, 16-bit customers, grew by approximately 15% sequentially to 1,641 in the September quarter. Our 32-bit microcontroller product line continues to make good progress. We now have 17 products in production. Customer interest remains very high and we have a large number of 32-bit designs that are incubating across a broad range of customers and applications. Revenue shipments commence to several of our early adapter customers although the revenues still small at this stage of the product line. While we know the design in cycles for most 32-bit customers will be long, we are optimistic about the product line's contribution to our overall microcontroller growth and leadership position. Moving to our analog products, the analog business was up approximately 12% sequentially, and was up approximately 21% from the year-ago quarter, achieving another record quarter for revenue. The strength in our analog business reflects the results of a three-pronged strategy we embarked on several years ago. First, it was to attach to Microchip microcontrollers, and this has been amplified by the greater analog content we find and in our more advanced 8, 16 and 32 bit microcontrollers. Second, was to attach the microcontrollers from other suppliers, which also gives us the beech head in those applications to win without microcontrollers in the future. And third was to win, wherever analog is required, attaching to FPGAs, DSPs, and ASICs etcetera. The investment in expanding our sales force over the last few years, as well as our focus on providing lower power products, the super specifications and short lead times, continues to attract new customers to Microchip for our analog solutions. This is reflected in the number of customers buying our analog products over the last 12 months having grown by 10%, to 14,080 customers. On serial EEPROM, our serial EEPROM business was down approximately 2% sequentially, and the pricing declined moderately quarter-over-quarter. Last week we announced the acquisition of Hampshire Company, a leader in the touch screen controller market. Microchip already has very strong market momentum with our mTouch sensing product portfolio. Hampshire’s touch screen product portfolio enabled us to extend this momentum and offer our customers a broader range of industry leading user interface solutions. We are excited about the possibilities we see in applying Microchip scale and geographic reach to exploit the full potential of Hampshire’s product portfolio. Let me now pass it to Steve, for some general comments and our guidance for the December quarter. Steve?

Thank you, Ganesh, and good afternoon again. Today I would like to first reflect on the results of the September quarter, then I will provide guidance for the December 2008 quarter. I am very pleased with our execution in the September quarter amidst one of the most challenging business environments that we have seen. Despite this environment, we made new records in the net sales, gross margin, and non-GAAP earnings per share. It was also very pleasing to see that we achieved strong growth in all of our strategic product lines, with 16-bit microcontrollers, flash microcontrollers, and analog all making new records. We also shipped a record number of development tools for the fourth quarter in result providing evidence of continued strong design momentum on our products. During the quarter, we also saw some continuing investor concerns about China during and after Olympics. We completed the quarter with a record sales in China, which were up 10.7% sequentially. Now I will discuss the guidance for the December quarter. By this time, you have seen the December quarter guidance from several semiconductor manufacturers, and large multinational electronics distributors. They are all seeing weak bookings and substantial concerns in the economy due to financial crisis and credit crunch. The story at Microchip is not very different in that respect. Our book-to-bill ratio for September quarter was 0.93. Our starting backlog for the December quarter was significantly lower than our starting backlog for the September quarter. We have seen week bookings so far in October. It seems that customers and distributors are frozen in their tracks, and do not want to release orders. The business situation is extremely difficult, with liquidity and credit issues reducing visibility, making revenue determination very challenging. With that backdrop, and after our internal and customer facing review processes, we expect our net sales for December quarter to be down 8% to 16% sequentially. With such a large drop in sequential revenue, we expect our inventory to grow substantially. To keep this inventory growth from spinning out of control, Microchip will implement a two week shutdown in our fab facilities at the end of this quarter. We will also implement a one week shutdown in our assembly and test facility in Thailand. We will also ask all employees to take one week off unpaid during the balance of this quarter. We needed this revenue guidance to get into the public domain, so that we can take the information deeper to our employees, factories and suppliers. Our track record of managing gross margin impact and cutting operating expenses during prior recessions has been very good. We again expect to be able to mitigate the impact in gross margin percentage and cut some of the operating expenses, including cutting bonuses, freezing new hiring, taking some attrition and reducing all other discretionary expenses. By taking all such actions, we expect to achieve a non-GAAP gross margin percentage between 59%, and 60%. Non-GAAP operating expenses are expected to be between 26%, and 27%. Non-GAAP earnings per share are expected to be between $0.35, and $0.41. I also want to assure investors that Microchip will maintain its commitments to dividends. Despite sharp decrease in revenue, we expect to generate approximately $85 million to $95 million in free cash flow this quarter. Our dividend is fully supported by the operational cash flow generation. We are not able to provide complete GAAP guidance because the impact of the acquisition of Hampshire Company on our GAAP financial is subject to a purchase price allocation which is not complete yet. I recently read a T.J. Rodgers paper on the issues with GAAP accounting with interest and I find myself completely in agreement with T.J., therefore I will provide GAAP guidance without the impact of the acquisition. GAAP gross margins are expected to be about 70 basis points lower than non-GAAP. GAAP earnings per share are expected to be about $0.04 and $0.05 lower than non-GAAP earnings per share. The acquisition of Hampshire Company is expected to be accretive to our non-GAAP earnings per share. With that, Jill, would you please poll for questions?

(Operator Instructions) Your first question today is from Doug Freedman with American Technology Research. Doug Freedman - American Technology Research: Hi Steve. Thanks so much for taking my question. Clearly it is a tough environment out there. Can you give us any color on where you see turns for the quarter? How are you managing? Whether you are seeing any pockets of inventory? It appears we are trying to pull down production at the same rate as demand is coming in. Do you think you are doing a good job of balancing that?

I look at this as a more of a demand destruction and inventory correction. Although any time you have reduction in demand, then any inventory anybody has appears multiplied and it looks like more inventory than they need. But the cause of that is not high inventory anywhere at our customers or channels. The starting point from this is really reduction in demand because of credit and other financial economic issues. We are managing it realtime and have taken swift action to allow reduction in our expenses, reduction in all sorts of discretionary travel and other expenses, and to reduce the inventory build by scheduling a two-week shutdown in our factories here in fab, and all the other actions I described. Doug Freedman - American Technology Research: Thank you so much.

You're welcome.

And our second question is from John Pitzer of Credit Suisse. John Pitzer - Credit Suisse: Good afternoon, Steve. I appreciate your taking the question. Given how volatile the environment is with your own business, how comfortable are you with able to making a good evaluation assessment on the Atmel acquisition? If your partner ON were to pull out of the acquisition, would you still be committed to moving ahead with it?

Regarding Atmel, we have tracked them for a long time and understand their business. We are in several of those businesses like microcontroller and eSCORE. We have not been provided any due diligence so far to really be able to confirm our assumptions and we are hoping for Atmel to come to us and want to get into meaningful negotiations and provide us some due diligence, which they have not been able to. While this environment is rapidly changing, we believe the Atmel acquisition is a long-term opportunity to build value for our shareholders, and it will take several months for us to acquire, even if it turned friendly tomorrow. So, I think the short-term severe reduction in demand that we are seeing is really not meaningful in terms of analyzing the Atmel acquisition. The second part of your question was what would happen if ON were to pull out. ON has headquarters here locally in Phoenix and I meet with them all the time including a meeting just two days ago and ON is fully committed to this acquisition. They are making good progress in lining up financing and we believe that both of us are jointly committed. We are also making a very, very good progress and at this point have several options for interested parties for the ASICs business. John Pitzer - Credit Suisse: Okay, thank you.

Okay.

And our next question is from John Barton with Cowen & company. John Barton - Cowen & company: Thank you very much. You’ve made comments about cutting down the fab production by shutting down for two weeks at the end of the quarter. If that addresses this quarter and making the assumptions, its going to be a level loading until that point. If we continue to see weakness into the March quarter, how would you address it at that point?

I think to go back to is, we have seen these environments before. Here history back in 2001 at the tech bust, we had a significant demand reduction like this right after events in 2003. We saw some impact in 97, due to the Asian financial crisis. So, the history could be a judge. We have short-term impact, which we managed through these shutdowns, and some time reparative one it could be done in subsequent quarters also, but eventually with strong proprietary business model, underlying substantial growth in 16-bit microcontrollers and merging 32-bit, strong growth on the high-end of 8-bit microcontrollers, analog and others. We always bounce back and we always have in the past and there is no doubt in anybody's mind that we will, we shipped a record number of development tools last quarter. As I have said before, nobody buys these tools to play games on them. All you can do is design with the products. So, design wins momentum and the demand creation efforts continue unabated. It's just that the customers are buying less products short-term because their own concerns about liquidity, credits and other things and temporarily they’re like deer in the headlights; they’re stopped in their tracks and not releasing orders. We don't really believe that such a deep drop in revenue is really sustainable over the long term.

Just another reminder for investors maybe some of you may know have a history with Microchip. But as we managed through these various events in the industry, with the proprietary products mix due to the long lived nature of our products, we do not take obsolescence. We don’t have obsolescence problems with this period. We manage it upfront similarly to what we're doing to-date, but we haven't seen any impact from that side of a business and anticipate that we can manage this event just as effectively. John Barton - Cowen & company: Thank you.

(Operator Instructions). Our next question is from Chris Danely with JPMorgan. Chris Danely - JPMorgan: Thanks, guys. To follow up on John's question. Assuming this tough environment does extend to the March quarter, and we do have another down quarter, can we expect you to trying to hold OpEx flat and gross margins flat? What would happen to your inventory in that case?

First of all, we wouldn't today expect the March quarter to be down. I think after such a steep drop, usually there is some sort of bounce because it always drops too far. Also, we have shown that a number of times with after drop following quarter is moderated, but taking a question, if that were to happen, then we will address that question at that time. Doing another shutdown or reduce starts or take some other actions to cut expenses and keep the draconian actions we are implementing in terms of discretionary spending cut and pay freeze and all those types of actions will have to continue longer or maybe even deeper. Chris Danely - JPMorgan: Thank you.

And our next question is from Harsh Kumar with Morgan Keegan. Harsh Kumar - Morgan Keegan: Hi, Steve, can you talk about the timeframe on Atmel acquisition; obviously it doesn't look like the Board is coming back to you, so how long are you prepared to wait and what happens next?

Hello Harsh. That question you should be asking Atmel. Right now the ball is in their court. We made an offer and we need a response, we have not received it. We may receive it along with their earnings release possibly next week and we may receive it tomorrow and we may not receive it even next week; we don't know. But next step is theirs and if the response is not coming in due course, then with the help of our advisers we will frame the next steps and we have several options. Harsh Kumar - Morgan Keegan: Steve, if you don't mind giving us a picture by end markets, maybe which were some of your end markets that were worst hit and if there were any bright spots at all?

We have really no end market commentary. We serve a very, very broad end markets with over 63,000 customers and have really do not give any end market breakdown anymore. Harsh Kumar - Morgan Keegan: Thanks, and Gordon, congratulations on your new position.

Thanks Harsh.

And your next question is from Ray Rund with Shaker Investments. Ray Rund - Shaker Investments: Thank you for taking my question. Steve, given that you have announced your intention or at least desire to purchase Atmel and you name a price, is there anything that stops you from buying Atmel stock at the current market price?

First of all, welcome back, Ray. That’s a sign that stocks may have gone low enough Ray Rund - Shaker Investments: Well, I’ve been here all along.

Haven't seen you lately, welcome back. Ray Rund - Shaker Investments: Thank you.

In answering your question, no. Nothing stops us from buying Atmel stock other than the normal issues, there are limits on how much you can buy based on Antitrust Hart-Scott-Rodino Clearance, at 5% you have to file and there are some other restrictions about that. They have a poison pill, there are various regulatory restrictions along the way. But no, it doesn't stop you. Ray Rund - Shaker Investments: So, have you actually been making prudent purchases up to the limits of the stock at these lower prices?

We're not prepared to answer that question. Ray Rund - Shaker Investments: Okay. Thank you very much, Gordon, good to see that you will be continuing and thank you for taking my question.

You are welcome Ray.

And your next question is from Uche Orji with UBS. Uche Orji - UBS: Thank you very much, can you hear me?

Yes. Uche Orji - UBS: Thank you. Two questions, first on the Hampshire acquisition. Can you give us an idea what will be the incremental revenue contribution, and you have your own touchscreen controller, Hampshire brings on and then when you -- if and when the deal with Atmel completes, you will also have incremental technology. What do all these technologies bring? Do they bring end market exposure customers or complimentary technologies.

Let me see if I can take your question in parts. This is Ganesh. With respect to the revenue contribution from Hampshire, I expect it will less than $1 million dollars in this quarter, so it’s in that size. We certainly see -- we don't have a touch screen controller solution in our portfolio today. We have touch sensing for buttons and sliders, that kind of stuff in our portfolio. So Hampshire gives us an expansion or extension of what we offered today in our [Entouch] portfolio. And with respect to the Atmel product line, it is probably too early to talk about them. We will give you an update on that at a future date. We see that they have touch solutions that are complementary to what we do. But right we are focused on how do we provide our solutions from Entouch for touch sensing and touchscreen control for Microchip. Uche Orji - UBS: Thanks. And in terms of Steve, in terms of Gordon's new role, it sounds like a much more role that could extend just beyond if and when the Atmel deal goes through. This means we will expect a more active role in terms of consolidation in the marketplace and if that were to be the case, would you still maintain your commitment to paying a dividend?

Yes. Microchip is absolutely committed to paying dividends as I said earlier. We are generating a very, very large cash flow from operations, and short-term, there is some inventory build that is going to happen, despite taking some shut down actions. But longer term, as that inventory goes back down, it even further generates even a high level of cash generation. There is no problem in Microchip's profitability or cash generation, and we are fully committed to not only paying dividends but continuing to grow the dividend on a quarterly basis Gordon's role purely is driven by -- Atmel is a significant acquisition, requiring due diligence, a lot of regulatory action, significant amounts of work, At Microchip, we have no such person fully committed to really doing that kind of work. So, I do it in my spare time, Ganesh does it in his spares time, everybody else does it. And there is a fair amount of work, and the amount of time it has taken just for Atmel to respond, I don't know really what that means. So we are prepared, we are prepared now with Gordon agreeing to really do this full time. It help us expand the management bandwidth to be able to take really all those actions and with his financial background, knowing everybody at Microchip, a long history and knowledge of our product lines and gross margins, cost structures and others, I think Gordon’s skills will be very, very useful. Now, you mentioned something broader about consolidation. I am not ready to be a proxy of the industry of consolidation in earnings. In grand scale, anyway. But Microchip has a number of small acquisitions on its plate, like the Hampshire Company. This one we were able to complete, another one of a similar size, we lost in the last three, four months. But there are two or three others that we have on our plate and one, two of those we may or may not be able to complete in the next three to nine months. But Atmel is a big one and the small ones required some attention also, so Gordon will be spending time on all of those. Uche Orji - UBS: Thank you very much. One last question, I didn’t see reference. I dialed in a little bit late. I know you said bookings continue to weaken, how much turns are you planning in terms of this quarter’s mid point guidance and if you can reference that in terms of historical chance level for Q4 that will be helpful?

We never really answered that question. It just never correlates to any history. We have said a lot of times, just look at the book-to-bill ratio at this time in the last quarter, was 1.15 and in the conference call we had got in question, why was the guidance so conservative if the book-to-bill ratio was 1.15. You see that we finished the quarter only up about 1%. And this quarter book-to-bill was 0.93 and we are guiding down 8 to 16. Our history and our experience has been that the book-to-bill ratio or amount of turns needed, are absolutely no correlation to the results. Customers some times place the orders early, by the time they place it late, by the time they place them early then they cancel them or they push them out and it will depend on customers' behavior as the demand develops and has really no correlation to a mid-point of terms needed.

It also driven by the behavior of our distribution partners. We have 65% of our revenue that we’ve recognized on the sell-through basis and if they have a different philosophy on they are holding an inventory one quarter versus another, it affects the book-to-bill ratio and hypothetically the gross shipment components. So, that is that for the complexity of that one metric.

Because we don't take the gross shipment to distributor as revenue, but its get into the book-to-bill components, so book-to-bill absolutely has no correlation to the actual sales out from the distribution and our revenue recognition. So, sorry can't really answer that very well.

And our next question is from Chris Danely with JPMorgan. Chris Danely - JPMorgan: Can you talk about what the effects of the credit crunch are having on your distributors?

The distributors have reasonable inventory today and most of our larger distributors are reasonably funded and there is no problem. Some of those smaller distributors around the world and regional territories could see some pressure, but I think the bigger pressure is really their ability to ship it to their customers, who have less credibility than they do. Microchip has 63,000 customers worldwide and we just don't really know the situation of every single customer out there. And that’s where the issues are, not really directly with Microchip channel so far. Chris Danely - JPMorgan: Okay and then is my follow-up, it sounds like the ASIC business took a hit this quarter. Do you expect it to continue to lighten the growth of your other businesses and can you just give us a few words of explanation on what’s going on there?

ASIC business did not take a big hit at all. ASIC business did quite well. Your assessment of taking a big hit is driven by inaccurate assumptions about the split of the 8, 16, 32. Chris Danely - JPMorgan: All right, thanks.

And your next question is from John Pitzer with Credit Suisse. John Pitzer - Credit Suisse: Yes, Steve. Thanks for taking the follow-up question. In your response to an earlier question, you talked about your expectation for the March quarter not to be down. And I guess is given the limited visibility and given the fact that a demand down, driven down in terms of a little bit less predictable than an inventory downturn, what gives you that confidence especially if the credit issue resolve itself probably go into a recession? Thanks.

I can't prove anything to you at this point in time. Visibility is limited. I made that comment looking at a lot of the historical parallels, as I have seen various industry events materialize and how our business has behave. Many times, we have had a sharp correction in a single quarter followed by a small increase. John Pitzer - Credit Suisse: Any color just around geographic comments for the December guidance?

I don't have really the breakdown by geography, but historically, Europe is weaker in December quarter always because the significant holidays at the end of the year. America is also tends to be weaker because of large number of holidays. In Asia, it is usually stronger in the December quarter because their real holidays don't come in till the March quarter, when the Chinese New Year takes place there. John Pitzer - Credit Suisse: Maybe it actually still be up sequentially?

I do not know. Such a large change in over 8% to 16%, when I don't believe now with all the geographies will come out. John Pitzer - Credit Suisse: Okay. Thanks, again.

You’re welcome.

And our next question is from Craig Ellis with Citi. Craig Ellis - Citi: Thanks for taking the question. Steve, the offer for Atmel has been out for about a month and a half now. I am wondering if you can offer some feedback that you might be hearing from either channel partners or customers on that proposed deal.

The offer for that was made on October 2nd. So it has been out for 21 days, three weeks, not a month and a half yet. I have largely talked to a lot of investors and analysts till that time and we have purposely not tried to talk to customers or distributors in a great length. There are lots of rules and issues related to it. So we issued a Dear Customer letter, which is posted on our website, you may be able to see it there. This essentially is saying that Microchip will have access to a much more expanded portfolio of product installations to meet the needs of our customers and other than that we don't really have any feedback from that channel. My guess would be when I really engage with them and partially I have been waiting for Atmel's response before we engage with any of them. My feeling is that the response would be very, very positive. Craig Ellis - Citigroup: On a separate topic, looking at the capital budget for this year, the company is at $150 million, I think that is flat or up from where we were a quarter ago in terms of what we're looking for given the guidance for the current quarter. Why wouldn't we have seen that come down?

We are making no new capital commitments right now, with the guidance coming down that much. There `is a lot of activity to push out existing orders of various items, which were ordered when there was growth expected. Last quarter was a record quarter. And going into the quarter ago, we were not expecting this quarter to be down. Actually we were expecting some growth. A number of businesses are growing, like 16Bit and Analog and others. So plus there are always mixed issues, handler for a different package, something for some other stuff. So there is a lot of stuff in order. And some time again, you need this guidance to be in the public domains, before you can go aggressively work that with your suppliers and vendors in canceling or pushing out equipment. If you start to do that, ahead of time before announcing this, then it leaks in the market place and causes some problems.

Craig a larger part of our capital this year is in brick and mortar. We know that we are going to need the extension, expansion and time, maybe not as quickly as we originally thought, but it is still an important part for us. We want to go ahead and complete that. So, there is no flexibility related to that component of our capital.

That’s worth $35 million, there the $115 million is really the brick and mortar in Thailand and India. Craig Ellis - Citigroup: Thanks.

And out next question is from Romit Shah with Barclays Capital. Romit Shah - Barclays Capital: Good afternoon. Steve, regarding the Atmel deal, would you still consider financing the deal with stock?

Will be still consider financing that deal with stock? Well, that offer is in cash. And like I said before, the next step is for Atmel to come and engage with us in meaningful deliberations and give us some due diligence, so we can understand what it is worth inside and then sit down with us and try to carve out -- I can't really answer that question without really knowing anything about it. Romit Shah - Barclays Capital: I think you said previously that you were open to issuing stock to get the deal done. I think when you announced that the stock was 26 or 27, and I was wondering if you were open to it with the stock down here?

It is a good question Romit. I admit I am not pleased with where the stock is now and offering stock when it is so low. Really it doesn't present a very good proposition but think about this. I can buy the stock from the market and then give it to them. So it is equivalent to paying cash. Think of it as maybe a two-step solution. When I give a $100 million in stock, you can buy $100 million of stock from the market at 21 – 22 and then give them that stock, it is equivalent to giving them $100 million in cash. So there are a lot of things that can be worked, but they have got to be meaningful negotiations with Atmel privately, not really in the public market place like this call. Romit Shah - Barclays Capital: I think the reason why I bring it up is, about a year ago, you made a big bet on microchip, and announced a fairly large buy back when the stock was 27, 28, now, it is at 21, 22 and I was just wondering if your mind set had changed.

Mindset had changed regarding what? Did you expect a year ago we will have a global crisis? If that is the case I want to see you.

Every stock has taken a substantial hit over the last two months. And these are uncharted waters that we are all going through in relation to what we thought 12 months ago and it's a whole new ball game.

After we bought the stock it went to 42. That's right. It went to 42 as high. And then if you were one person in the world, who knew what was going to happen here, with the S&P down 40%, then we should meet. I want to pick your brain. Romit Shah - Barclays Capital: All right. Thank you.

Welcome.

And your next question is from Craig Hettenbach from Goldman Sachs. Craig Hettenbach - Goldman Sachs: Yes thank you. Following up on the Atmel deal, you mentioned product line expansion. Can you give us a little color in terms of motivation behind the deal? If I think about three different buckets be it product line expansion being one, consolidation in an industry that needs it and is very fragmented, and then number three, just some economic value to Microchip doing the deal. Can you put any waiting behind some of those different scenarios in terms of the motivation behind the deal?

I really can't put the waiting behind I think all three points are valid and those are some of the rationale for the deal we have describe before. It provides customer a much more complete solution with very strong 8-bit product line and strong 16-bit product line from Microchip and it combined a very strong 32-bit product line, combining our 32-bit portfolio along with theirs and it provides significant value to Atmel shareholders and still leaves the value to be created for our shareholders, as we apply our manufacturing strength and management strength and infrastructure to improve that business. So, I think it’s a good deal for everybody. That’s a rationale. Craig Hettenbach - Goldman Sachs: Okay. Thank you.

You’re welcome.

This concludes our question-and-answer session. So, I’d like to turn the call over to Mr. Sanghi.

Thank you for all. You know I think you all know that these are completely uncharted waters. Every semiconductor company that has announced the results have been just absolutely, something people didn't expect starting from Linear Technology, whoever the first one. I am really so glad that I was in the first one this time, I have been in few times and that’s not pretty usually, not pretty being later either, but here we are and we show you that we have managed through these times very, very well, better than any of our competitors in the past. And we will show you again this time and we will see many of you on the road as we visit some of the conferences in this quarter. Thank you.

We thank you for your participation on today’s call. Have a wonderful day.