Eric Bjornholt – VP and CFO Ganesh Moorthy – EVP and COO Steve Sanghi – Chairman, President and CEO

Uche Orji – UBS Romit Shah – Barclays Capital John Barton – Cowen & Company Harsh Kumar – Morgan Keegan & Co. Craig Ellis – Caris & Company Chris Danely – JP Morgan James Schneider – Goldman Sachs Doug Freedman – Broadpoint AmTech Brendan Furlong – Miller Tabak Harsh Kumar – Morgan Keegan & Co. Jung Hwang [ph] – Millennium Partners Tim Mahon – Gartner Invest Eric Ghernati – Merrill Lynch Eric Gettleman – Chesapeake Partners

Good day, everyone, and welcome to the Microchip Technology conference call. As a reminder, today's conference is being recorded. At this time, I'd like to turn the call over to Microchip's Chief Financial Officer, Eric Bjornholt. Please go ahead, sir.

Thank you and good morning everybody. I want to apologize. I guess we were having some trouble with the IR page on our website, and so we are working diligently to get that updated, but we wanted to start the call and hopefully that gets up and running here shortly. So, 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 or predictions and that actual events or results may differ materially. We refer you to our press release of today as well as our recent filings with the SEC that identify important 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; Ganesh Moorthy, Executive Vice President and COO; and Gordon Parnell, Vice President, Business Development and Investor Relations. We will conduct today's conference call in two separate parts. The first part of the call will be our normal earnings call, followed by a question-and-answer session. And in the second part of today's call, we will summarize our announced acquisition of SST, and then hold a separate question-and-answer session relating to the acquisition. For our normal earnings call, I will comment on our third quarter fiscal 2010 financial performance, and Steve and Ganesh will then give their comments on the results, discuss the current business environment, discuss our guidance for the March quarter, and update other pertinent matters regarding our business. We will then be available to respond to specific investor and analyst questions. Again, please hold any questions related to the acquisition of SST until you were prompted to queue up. Net sales for the December quarter were $250.1 million, up approximately 10.3% from net sales of $226.7 million in the immediately preceding quarter, and up 30.1% from net sales of $192.2 million in the December 2008 quarter. On a geographic basis, revenue in the Americas was up 6.1% in the December quarter, Europe was up 10.2% and Asia was up 12.4%. Asia continues to be our largest geographic region, representing 52.3% of sales in the December quarter. The Americas were 23.7% of sales, and Europe was 24% of sales. These measurements are based on where the product is delivered for manufacturing purposes for our customers, but does not necessarily represent where the design activity is taking place or where the end product consumption is occurring. We are continuing to include information on our press release on various GAAP and non-GAAP measures. We have posted a full GAAP to non-GAAP reconciliation on our Investor Relations page of our Web site at www.microchip.com, which we believe you will find useful when comparing GAAP and non-GAAP results. Non-GAAP net income for the third quarter of fiscal year 2010 was $70.1 million or $0.38 per diluted share, an increase of 31.2% from non-GAAP net income of $53.2 million or $0.29 per diluted share in the immediately preceding quarter. The after-tax impact on the December 2009 quarterly earnings that have been excluded from our non-GAAP results, include $8.5 million from a favorable tax settlement with the IRS, $7.7 million in share-based compensation expense, $1 million in non-cash interest expense associated with our convertible debt, and $0.5 million in charges associated with our acquisition activities. GAAP net income was $69.4 million in the December quarter or $0.37 per diluted share. The favorable impact on GAAP EPS from the settlement with the IRS was $0.045 and will not be a recurring item in the March 2009 quarter. I will now go through some of the operating results for the December quarter. I will be referring to gross margin and operating expense information on a non-GAAP basis, prior to the effects of share-based compensation and acquisition related expenses. Gross margins were 59% in the December quarter compared to 55.5% in the September quarter. The 350 basis point quarterly increase in gross profit margin was driven by a variety of factors including higher production activity in our factories and continued cost reduction efforts from our global manufacturing operations. With the increase in revenue, we were able to achieve operating leverage from the business, with total operating expenses of 26.2% of sales in the December quarter compared to 27.7% in the prior quarter. Research and development costs were $27.2 million, representing 10.9% of sales. Sales and general administrative expenses were $38.4 million, representing 15.3% of sales. Our non-GAAP operating expenses as a percentage of sales were at approximately the same level in the December 2009 quarter as they were in September 2008 quarter, which was Microchip’s peak earnings quarter. The December operating expenses includes a substantial portions of all the cuts that we took in our employee compensation programs during the global financial crisis and the forecast that we have provided to the March 2010 quarter includes the full run rate of these programs. On a full GAAP basis, gross margins including share-based compensation and acquisition related expenses were 58.4%. Total operating expenses were $73.4 million or 29.4 % of sales and include share-based compensation of $7.6 million and acquisition related expenses of $0.3 million. On a non-GAAP basis, the tax rate for the December quarter was 13.4%. The GAAP effective tax rate for the December quarter was 0.7%. The difference in the GAAP and non-GAAP tax rate was driven from an 8.5 million favorable settlement with the IRS related to fiscal year 2002 through 2004, as well as the higher tax rate that applied to the non-cash interest expense on our convertible debt. Our tax rate is impacted by the mix of geographical profits and the percentage of our cash that is invested in tax advantage securities. We expect our going forward non-GAAP tax rate to be between 12.5% and 13%. The dividend declared today of $0.341 per share will be paid on March 10, 2010 to shareholders of record on February 18, 2010. The cash payment associated with this dividend will be approximately $62.9 million. Moving on to the balance sheet, Microchip's inventory balance at December 31, 2009 was $112.8 million, representing approximately 99 days. Inventory on Microchip's balance sheet increased by $4.3 million or 3 days and days of inventory at our distributors increased to 40 days compared to 35 days at the end of the prior quarter. I would like to remind you that Microchip recognizes its distribution revenue on a sell-through basis in its worldwide distribution channel. At the end of December quarter, the combined inventory on Microchip's balance sheet and its distributors was 139 days, which is in the lower range of our historical averages. During the December quarter, we aggressively increased our manufacturing output so we can continue to satisfy the needs of our customers by providing industry best lead times. We expect inventory days on our balance sheet in the March quarter to be about flat. The increases in our production output will have ongoing positive impact on Microchip's gross margin percentage. At December 31, our receivables were $113.8 million, an increase of $7.1 million or 6.7% from the balance as of the September quarter. Receivable balances are in great condition with excellent payment performance continuing from our customers. Over the past year we have not had any significant bad debt write-offs in our business. We continue to closely monitor customer activity to ensure we are protecting the receivable assets on our balance sheet. As of December 31, Microchip's cash and total investment position was approximately $1.5 billion. Our cash generation from the business was $89.4 million, prior to the payment of $62.5 million dividend. Our cash generation continues to be strong, and our total cash and investment position is projected to grow again in the March 2010 quarter. Capital spending was approximately $18.7 million for the December quarter, and our fiscal 2010 capital expenditure forecast is currently $50 million. We are investing in equipments to support the revenue growth of our new products and technologies, and are also taking advantage of low cost equipment opportunities in the marketplace, that will position us well for future growth. Depreciation expense for the December quarter was $21.7 million, which was flat to depreciation in the September quarter. I will now ask Ganesh to give his comments on the performance of the business in the December quarter. Ganesh?

Thank you, Eric, and good morning everyone. I will now comment on the individual product lines. All three of our product lines, Microcontrollers, Analog and Serial EEPROMs delivered outstanding growth in the December quarter. We continue to see the results of our strategy to stay invested in our new product development and demand creation resources during the global recession. By employing a shared sacrifice to cut costs instead of resorting to mass layoffs, we believe, we are seeing the continuation of differentiated revenue growth and operating profit results. Let me now take a closer look at each of our product lines, starting with Microcontrollers. Our Microcontroller business delivered superb results and was up a strong 10% on a sequential basis and up 30% from the year ago quarter. The December quarter was also the third consecutive quarter of double-digit sequential growth for the Microcontroller business. Flash microcontrollers represented 81.3% of our Microcontroller business in the December quarter. Our 8-bit Microcontroller business had another excellent quarter as all segments of our 8-bit product line experienced very strong growth. Our 16-bit microcontroller business achieved another record for quarterly revenue with strong sequential growth of 10%, building upon the 49% sequential growth we had last quarter. 16-bit microcontrollers also grew over 101% from the year ago quarter. New customers and new designs going to production continued to help drive growth as a number of volume 16-bit customers grew by 239 customers to 2,289. Our 32-bit microcontroller product line meanwhile continues to make good progress with 44% sequential growth, albeit from a smaller base, building upon the 56% sequential growth we had last quarter. We now have 173 32-bit microcontroller customers in volume production. Moving to development tools, we had another record quarter with 41,492 development tools shipped in the December quarter, the third consecutive quarter of record development tool sales. As you have seen from our growth in recent quarters, development tool sales are an excellent leading indicator of continued strong designing activity and acceptance of our solutions by our customers, and the continued strength of record development tool sales should bode well for future growth. Now moving to the analog products, our Analog business also delivered outstanding results with very strong sequential growth of 14.1% and 40% growth versus the year ago quarter to achieve record high revenues. This also marked the third consecutive quarter of double-digit growth for our analog business, and the first time we have crossed the greater than 100 million annualized revenue run rate. Growth was especially strong in the linear, interface and safety and security product lines. We are very pleased with the design win and revenue momentum our analog business has shown. We continue to introduce a steady stream of innovative new products that we expect will contribute to continued strong revenue growth in the coming quarters. Earlier this month, we announced the acquisition of ZeroG Wireless, an innovator in low-power WiFi solutions for the embedded market that complements our broad portfolio of microcontrollers. ZeroG was a private company located in Silicon Valley and is in an early revenue stage. Now moving to Serial EE [ph] memory products, this business was up 9.8% sequentially. We were pleased to see solid growth in this area of our embedded control products. We continue to run this business in a disciplined fashion that maintains consistent profitability and serves our microcontroller customers to complete their solutions. At a time when many of our competitors have significantly pushed out their lead times to between 14 weeks and 26 weeks, Microchip's investment in inventory, use of flexible rotating time off in our factories during the recession and ongoing operational excellence has enabled us to continue to provide industry leading lead times. In the current environment this is translating to further growth in our market share as we are better able to respond to rapidly rising customer demand, capitalizing our competitors inability to supply products, as well as to instill confidence in customers as to who they should commit new designs to, so that they're assured a future supply. Let me now pass it to Steve for some general comments, as well as our guidance for the March quarter. Steve?

Thank you, Ganesh, and good morning everyone. Today, I would like to first reflect on the results of the December quarter, then I would answer some of the investor and analyst concerns that we have heard in the last few months. Then I will talk about our guidance for March 2010 quarter. Reflecting on the December quarter, I want to thank the entire Microchip team for delivering an outstanding quarter in every respect. We beat the upper end of our revised guidance in the net sales, gross margins, operating profits, earnings per share and free cash flow by a significant margin. It is also the first time in over 15 years that we have achieved three consecutive quarters with over 10% sequential growth in net sales. We also beat the lower end of our operating expense and inventory guidance by a good margin. We have now been profitable for 77 consecutive quarters and the March quarter will be our 78th. From a geographical standpoint, as Eric discussed, we achieved substantial sequential growth in all major geographies of the world, and on product lines the story was impressive too. As Ganesh discussed, we achieved significant sequential growth in all of our product lines, with microcontrollers up 10%, 16-bit microcontrollers up by 10% sequentially, and analog up by 14.1% sequentially. I also wanted to highlight the comparison to SIA numbers that were recently released. While Microchip does not participate in SIA and short-term SIA numbers are often suspect, many of the investors and analysts follow those numbers. So, based on this SIA data, calendar year 2009 industry sales for 8, plus 16-bit microcontrollers were down 23.6% from calendar 2008. Microchip's 8-bit plus 16-bit sales for calendar 2009 were down 14.6% from calendar 2008. So 23.6% for the industry and 14.6% for Microchip. If you look at December quarter 2009 over December quarter 2008, so last quarter over a year ago quarter, then the industry 8-bit, plus 16-bit microcontrollers sales were up 12.3%, while Microchip’s 8-bit plus 16-bit MCU sales were up a whopping 29.6%. So industry had 12.3% up and Microchip up 29.6% showing significant market share gains. We are gaining share in both 8 as well as 16-bit microcontrollers. Next, I would like to discuss four concerns that investors and analysts have raised in the last several months. The first of these concerns is, where are Microchip’s growth drivers. The best way to prove that growth is by posting strong sequential growth, which we have been doing for several quarters. Beyond that there are five major drivers of growth. First is our multi-year demand creation program in which we added 28% additional sales and application personnel three years ago. Then we retained them through the global financial crisis of last year. They have created a steady stream of new customers and new design wins that are turning to production adding to our growth. Second, we have an industry leading design engineering awareness of our 8, 16 and 32-bit microcontroller solutions. On 8-bit microcontrollers, we're the number one choice of designers by a wide margin. On 16 and 32-bit we're tied in the number first place. Number three, we have significantly expanded our served available market with the introduction of our 400 new products in the last three years, covering several key thrust areas like extreme low-power, touch sense, USB interface, advanced graphics, high-performance analog, Ethernet connectivity, RF connectivity, motor control, and digital power supply. Number four, our Analog business is growing and gaining market share. We are gaining by attaching analog to our microcontroller application, as well as embedding analog functionality on the microcontroller dye. And number five, we are gaining share from large but financially strapped competitors. The second area of concern that investors and analysts have shown is the gross margin percentage. In the earnings call in November, we shared our internal plan for calendar year ’10. We gave a non-GAAP gross margin of 58.5% for the year, which was lower than our prior peaks. That left the impression that gross margins are challenged. We have already exceeded that gross margin for the December ’09 quarter, and we have guided 60% gross margin for the March 2010 quarter. We now believe that we will achieve our previous record gross margin of 61.6% non-GAAP by the end of this fiscal year ‘11. The third area of concern has been operating expenses. Analysts have the impression that there are large operating expenses coming that are not in the model. That is not correct. In the quarter we just announced the operating expense was 26.2% non-GAAP, which matched the operating expense in our record quarter of fiscal Q2 09. From September to December quarter, that we just completed, our operating expenses grew by 4.3% while sales grew by 10.3%. In the March 2010 quarter, we have all of the employee compensation programs back in the operating expenses, and we expect the operating expenses to stay in this range of 26.2% as a percentage of sales. The final concern shown has been that the inventories are getting replenished and hence it is at the cycle top. Microchip’s inventories plus our distributors’ inventories combined are the lower end of historical days of sales. We have always differentiated ourselves from the competition by maintaining some short lead times. If we could say anything about our inventory, our inventory at Microchip is lower than we would ideally like, while our distribution inventories in reasonable range. We are continuing to make the necessary changes to bring inventories in line with customers’ needs and maintain the best lead plans in the industry, but because of strong growth that we are experiencing, we expect inventory to really stay flat in the March quarter as Eric talked about. Having addressed these investors and analyst concerns, I will now move to provide guidance for March 2010 quarter. Our book-to-bill ratio for December quarter was 1.12. And we started the March quarter with an all-time record high backlog. So the visibility is improving significantly. The bookings rate so far in the quarter has been very strong. This quarter we see significantly higher shipping days in US and Europe, but lower shipping days in Asia, because of Lunar New Year. Considering all that, we expect our net sales for the March quarter to be up between 3% and 7% sequentially, above what normal seasonality is for our business. We expect our non-GAAP gross margin to be between 59.75% and 60.25%, which is 75 basis points to 125 basis points improvement over the December quarter, and we expect our GAAP gross margin to be between 58.85% and 59.35%. Regarding earnings per share for the March quarter, we expect non-GAAP earnings per share to be between $0.39 and $0.41. We expect GAAP earnings per share to be between $0.34 and $0.36. Now, I would like to comment on the longer-term outlook for calendar year '10, and this outlook for calendar year ‘10, excludes the acquisition of SST that we just announced. We will talk about it later. Last quarter, we shared our internal plan for calendar year ‘10 with investors and the financial community. We talked about calendar year ’10 revenue of $1.05 billion, up 25% from calendar year ‘09. This internal forecast met with skepticism from several of the analysts. I'm happy to tell you that after one quarter, we see our calendar year ’10 plan to be quite conservative. With just March quarter’s revenue times four we met our internal plan. And I have already talked about gross margin for calendar year ‘10 to be well above our internal plan. While we won't be revising our internal plan every quarter, we are confident of beating it by a significant margin. So, as we said in the start of the call, we will first take questions from investors and analysts about our earnings and our guidance, and after that we will make some more commentary about the SST acquisition followed by a second questions and answers period. With that operator would you please poll for questions.

: Uche Orji – UBS: Sure. Thank you very much. Steve, let me just settle by asking you about where you are now with regards to utilization rates? This has provided some boost to margins, obviously. If we're looking to going forward, how much more upside could come from that? And also, if you can talk about where you see structurally margins going? In the opening remarks, you commented that you are now likely to be back to – by the end of this year, to the levels where – at your peak levels. Is there any structural feeling to gross margins, any way for us to think of where gross margins would get to? So if you can comment on some drivers that would be helpful, thanks.

Uche, we don't provide specific capacity utilization levels, as it just seems to create confusion with investors and analysts. People seem to do a straight extrapolation, and in reality it doesn't quite work that way. We see continued gross margin improvement in our fiscal fourth quarter based on the non-GAAP guidance we provided 59.75 to 60.25, and we also indicated earlier that we should get back to our prior peak gross margins of 61.6% non-GAAP over the next four quarters by the end of fiscal year ‘11. And you know, that gets to the prior peak gross margins, and that is why we believe that without SST that is sort of where our business model is. Uche Orji – UBS: Yes. Just a different question, you talked about you were capitalizing on long lead times by your competitors and taking share as a consequence. If you're able to please comment where by product this is happening? This is the 8-bit or 16-bit or – and also by product. If you can just give us some color as to where you have seen the competitors struggling to meet demand and you're seeing incremental share gains. So that will be very helpful. Thanks.

Ganesh.

You know the delivery performance from the competitors span all their product lines 8s, 16s and 32s. Obviously, our large market presence is in 8-bit microcontrollers. So from a frequency standpoint that is the most frequent place where we see that inroad happening. But it affects more than just today's design that we can switch to Microchip by helping the customer take advantage of our supply, and helping them on the technical side to make the conversion. It affects their confidence about future designs. As they look at future designs, that can affect 8, 16 or 32 because when customers do their designs they want to be able to take it to production, and they want a supplier who has manufacturing output that lines up with what they are trying to ship.

And our next question will come from the side of Romit Shah with Barclays Capital. Your line is open. Romit Shah – Barclays Capital: Hi, guys. Steve, you talked about fewer shipping days in Asia this quarter. Do you still expect that region to grow in the March period?

Yes, the backlog and the bookings we are seeing from the Asia region is quite strong, and taking into account the less number of shipping days, the stronger shipping before it and then the recovery again afterwards, we're modeling some growth in that region. Romit Shah – Barclays Capital: Okay. And then another question on margins. You talked about getting back to peak gross margins by the end of fiscal '11. Should we assume that operating margins would be in the mid-30% range under that scenario?

Well, if you take 61.6% non-GAAP and the operating expense that we guided to about 26.2% range, then the rest of the math, you know, it gets to about mid-30s, yeah. 61.6 minus 26.2, 35.4. Romit Shah – Barclays Capital: Thank you.

And another question will come from the side of John Barton with Cowen & Company. Your line is open. John Barton – Cowen & Company: Thank you very much. Steve, you reminded us that you'd given a 2010 forecast early. You're not updating that per se, but you kind of alluded to the fact that you think you will beat that. And obviously, the March guidance kind of sets the stage. As you're looking through 2010, when you think about end demand, do you think it kind of materializes in a normal seasonal fashion beyond the March quarter and then whatever share gains you get on top of that? Or do you think those end markets that are still yet to rebound from the inventory depletion mode that they were in?

I think we have consistently said that across our 70,000 customers, and a large amount of our business coming from distribution, we don't really can break out the end demand for you by segment. You know, once in a while we have done analysis on some sample customers during the middle of the housing bust and all that, we can create an indicator for a short period of time, but customers move around regarding where they buy their product from. Many of them switch to distributors or CMs or whatever. So our product strategy has always been very horizontal in all of our product lines. We sell across thousands of applications, 70,000 customers and we're seeing a broad-based recovery in every geography around the world. And beyond that we can't really give you an end market commentary. We're seeing our business grow significantly better than our competitors. I did some comparisons to SIA this time and the last two or three times also. So we're seeing significant share gains. Our new product pipeline is really the best it has been in a long time because we stayed committed with our resources and product designs in the last year and a half, where many of our competitors laid off people and killed the product pipelines. Our lead times are shorter, our customer service is excellent. So customers are designing with us. So we see a very, very strong outlook in every way we look at it. John Barton – Cowen & Company: Last quick one, if I could. Eric, if you could just comment on the other income line? Are the quarter-on-quarter changes we've seen purely interest rates? And then how do we think about that going forward?

Yes, that is primarily driven by interest rates. We have had some longer-term investments that we have made that have rolled off and then kind of reset to lower rates, and what we are able to invest on today. So that is the major driver, and then going forward, I would say that we're pretty much in a flattish mode. As we generate cash we invest that, but the investment returns at this point in time are pretty low.

And our next question will come from the side of Harsh Kumar with Morgan Keegan. Your line is open. Harsh Kumar – Morgan Keegan & Co.: Hi, guys, first of all, congratulations on some tremendous numbers and guidance. A question for Steve, Steve, there's been a lot of dislocation in your competitive environment. I'm sure some of those guys will try to come back in the marketplace. So my question is on the design cycle. Let's say you take a design win in an appliance or other product, do you typically keep it for the life of the product or do you see these guys come back next year and try to get back in?

Well, Harsh, we – once a customer does a design, everybody is so resource constrained these days, where people have laid off their resources, they have contracted them out. And once that design goes into production we rarely ever see in our industry the design mid-production switch. People switch mid-production design only if they cannot acquire the product or there are significant quality or other support issues. Otherwise, the design switching usually happens on subsequent design if you give the customer then a reason to go away from you. In this environment, when we are actually billing our customers and supplying the product, where competitors have very long lead times, the companies who are designing with us and they are favoring us, they are actually making even a stronger commitment to us going forward. Forget about going back to the other competitors, they will keep on giving us subsequent designs, because they have seen cycle after cycle, Microchip with investment in inventory and short lead times, continuously gaining share is providing them the right product, right functionality at the right price and at the right lead times. Harsh Kumar – Morgan Keegan & Co.: And another one for you. Microcontrollers did very well. Is there any particular area, Steve, such as low power or touch that just stood out? Or was it just really broad-based?

Well, it is very, very broad-based, but I did highlight many of the focus areas in the last three years, where we have introduced 400 new products in the last three years. And many of these products have been in the area of extreme low power, where I believe our portfolio is about 60 or 70 products now. Touch sense, which is really on five. We are gaining touch sense designs everywhere, USB interface, advanced graphics, high-performance analog, Ethernet connectivity, RF motor control and digital power supply. Some of these are highlighted and there are many, many more.

And our next question will come from Craig Ellis with Caris & Company. Your line is open. Please go ahead. Craig Ellis – Caris & Company: Yes, thank you. It looks like the analog business has been outgrowing the microcontroller business for the last couple of quarters. To what do you attribute that and would you expect it to continue as we look into 2010?

You know, analog attaches to much more than just our microcontrollers and much more than just microcontrollers in general. So, as we have grown the portfolio of products, we have a much richer portfolio of customers to pick from. We had further reach than what we had previously, and we expect continuing growth in the analog business in the coming quarters. Craig Ellis – Caris & Company: Thanks, Ganesh. And then on the 32-bit business, you had very nice growth, 44% quarter-on-quarter. When can we expect that that business would start to be a material part of revenues for the company?

You know, at the rate that it is going I expect somewhere here in the next 12 months it will get to that point. I mean, as it grows at those kind of high double-digit rates it becomes a larger number every quarter.

I would add that 32-bit designs take about two, two and a half years to get to production. So they are really on the higher end, and our products have been in production less than two years. So, what you are – the ramp you are seeing right now is still from early stage design, preintroduction alpha sites and beta sites and things like that. So the real major customer ramp, where we have significant high-volume designs is really still around the corner. Craig Ellis – Caris & Company: And so that would be later this year and into next year, Steve?

That is right. Like Ganesh said, in the next 12 months you will see significant up-tick on those designs going to production. Craig Ellis – Caris & Company: Thanks. Nice job, guys.

And our next question will come from the side of Chris Danely with JP Morgan. Your line is open. Chris Danely – JP Morgan: Hi, thanks guys. If you guys end up hitting your revenue plan for this year, can you just remind us of when you'll start to need to add extra capacity, and when your utilization rates max out, in terms of quarterly revenue?

Well, again we don't break the utilization, like I said earlier, but we are continuously incrementally adding fab capacity, bottlenecks here and there. The mix today of the products and the technologies is different than the mix we had two years ago when we were at the prior peak. You know, that is why the utilization plays funny games, and you guys get the wrong extrapolation, because over two years as you come back to the same peak revenue, things are different and they are different processes and more advanced processes. So we are continuously, incrementally and slowly adding to the capacity to provide the product for our customers at very, very short lead times. So in this coming year as the business continues to grow, we will be incrementally adding capital in the range that you know, you have seen in the low capital for Microchip over the years.

I guess just one additional comment on that for everybody on the call, is we have a lot of floor space to grow into in the fab and our assembly and test operations. So it is really just equipment, and we have tried to take advantage of low cost opportunities in the marketplace during this downturn. Chris Danely – JP Morgan: Oh, and Eric, just to follow on, so for fiscal '11, would we expect the same CapEx to sales type of range?

You know, if you go back and look at our history, and good years, I would say CapEx is in the $70 million range. We haven't put together a forecast yet. But I mean it will probably be plus or minus $10 million to that. Chris Danely – JP Morgan: Perfect. And then for my follow-up, you guys commented that a lot of your competitors' lead-times have stretched out. Steve or Ganesh, have you guys seen any increase in your own lead-times?

The increase in 80%, 90% of our products are still available in a fairly relatively short lead time. You always have exceptions, where it is a special package or a given dye where a large demand came in, and those exceptions are a little more than usual now than there were nine months ago, but Microchip’s lead times are really still pretty – you know best in the industry. Chris Danely – JP Morgan: Thanks.

Okay. What I would like to do operator now this go to the next section, where we will talk about SST. First we will make some prepared remarks and after that we will reopen it up for questions, and we will take questions regarding SST. In the second section, you can also add any other remaining questions somebody may have regarding the earnings call.

Okay. As most of you are aware by now, earlier today we announced a definitive agreement to acquire Silicon Storage Technology, Incorporated, who are otherwise known as SST. We are excited by this acquisition, and we would now like to give you a brief overview of who SST is, why we decided to acquire them, how we plan to handle the financial reporting for the various SST businesses and then summarize the overall transaction. So let us start with an overview of who SST is. SST is a global leader in embedded flash technology and the licensing of these technologies. SST also has several other businesses nested within the company, including serial, parallel and specialty flash memories, 8051 microcontrollers and NAND controllers, NAND drives that provide solid state storage, power amplifiers and low noise amplifiers for WiFi applications. SST is headquartered in Sunnyvale, California, and it has 574 employees worldwide. SST has approximately $180 million in cash and liquid trading securities on their balance sheet and no debt. We see a compelling strategic rationale to acquire SST for the following reasons. First, their proprietary SuperFlash technology is a critical building block technology for advanced microcontrollers. For example, this super flash technology is licensed by most major foundries and microcontroller OEMs. This acquisition secures critical embedded flash technology for Microchip’s core microcontroller business, and it also enables us to get earlier access to advanced technologies versus waiting until they are in production at the foundries. This acquisition also give us the ability to customize technology variance that would give us an advantage over competing technologies. Second, SST adds a strong patent portfolio to Microchip’s intellectual portfolio. SST has over 360 granted patterns and over 180 patents that are pending. And third, we would add 1851 microcontrollers and NAND controllers to our microcontroller portfolio. NAND controllers essentially are specialized microcontrollers for a given application. Now let us move to the financial reporting plan. The licensing business, 1851 microcontrollers and NAND controllers will be consolidated into Microchip’s financial reporting and continuing operations. We plan to continue investing in SuperFlash technology, consistent with enabling our technology needs and growing the licensing business. We plan to rationalize the serial, parallel and specialty flash memory businesses consistent with supporting and growing the licensing business and emulating microchip high margins serial EEPROM business model. We will treat the memory business as an asset held for sale until the rationalizing is complete. And we plan to divest the NAND drive and WiFi amplifier businesses and will hold them as assets held for sale. Finally let me provide you with a transaction summary. The $2.85 per share acquisition price translates to a transaction value of $275 million. However, once you account for exit fees, $180 million in cash and liquid trading securities in net transaction value is approximately $95 million. We expect the blended non-GAAP operating margins to be excellent after we complete the plant divestitures and rationalize the memory business. We expect the transaction to be accretive on a non-GAAP basis in the first full quarter after the transaction closes, and we expect to close the transaction in the second calendar quarter of 2010. The presentation with the key points we have reviewed with you today will be available from our website after this conference call, and with that we will be happy to take your questions about the SST acquisition.

Operator, you can reopen the lines for questions.

(Operator instructions) And our first question comes from the side of James Schneider with Goldman Sachs. Your line is open. Please go ahead James Schneider – Goldman Sachs: Good afternoon, and thanks for taking my question. I guess, broader on the capital allocation front, this is, I believe, the fifth acquisition you've made in the last 18 months or so. Could you just comment on your broader strategy for capital allocation? Whether you have more of a desire to do acquisitions right now as a use of cash rather than dividend increases, which have been a little more measured of late?

Well, you know, our dividend is still one of the highest in the industry, and you know as analysts you guys should make up your mind. You know, we have heard people say that the dividend was too high just two or three quarters ago, when for a very short period of time, we could not cover the dividend during the global financial crisis, and saying why you are paying such a high dividend, others said the dividend would be cut. We were the one company that didn't cut it, maintained the dividend and now we're slowly growing it again, still keeping it at industry high. And you know, yes, in the last 18 months we have done five acquisitions, but most of them have been quite small. This is the largest acquisition, which will use about $95 million to $100 million. Many others have been really single-digit, low single-digits kind of numbers. So our strategy with these acquisitions is elbow out. With each and every acquisition, we are slowly and steadily, you know, elbowing out to the adjacent you know, sockets around the microcontroller or helping add to our microcontroller whether it adds, you know, WiFi capability to a microcontroller with 0G [ph], whether it added touch screens with the Hampshire acquisition, whether it gave us the world-class C compilers with the software acquisition we did, and in this particular case, the SuperFlash technology you know, nearly 4 billion plus microcontrollers a year are built on SST flash technology. Majority of our competitors and major foundries have licensed that technology. So we believe that that technology in our hands will have significant advantage to get advanced leading access to that. So hopefully that addresses your question. James Schneider – Goldman Sachs: Yes, and then if I might – that's very helpful. And then maybe if I could ask a follow-up, specifically on SST. If you look at the designs that are in the marketplace out there, how often does your microcontrollers appear alongside SST memory products and designs? And do you expect you could also get some additional cross-sell opportunities in addition to the advantage you mentioned before?

The SST memory products are not at all competitive with the memory business we have. We make a serial EE memory, which is very, very low density, you know, 1K memory to 1 Mb memory. SST's products are more in the area of you know, either they are serial flash or parallel flash. So there are really relatively different market. We have not seen these products very much around our microcontroller, although when you get into large customers, you know, large blue-chip customers they use everything and we will find some opportunities, but our goal with the SST business in the memory is not necessarily to ship more of those memory products around our microcontrollers, but to actually rationalize the large memory business, so it makes high profits like our serial memory business. James Schneider – Goldman Sachs: Understood. Thanks very much.

And our next question will come from the side of Doug Freedman with Broadpoint. Your line is open. Doug Freedman – Broadpoint AmTech: Great, thank you and congratulations, guys, on a solid quarter and interesting acquisition here. If you could go into details about what – you know, forgive me for not knowing more about SSTI's business, but what percentage of SSTI's sales will you keep and what percentage of them are being held for sale?

I think it's a detailed question that we don't have a precise answer today. You know, this acquisition is supposed to close I think in early April approximately. So we have the next two months to completely figure that out. So as we are closing this acquisition, we'll hold another conference call and give you a guidance, on really, you know, how the total sales and model would look like. Right now you can basically assume that you know, Microchip is not going to jeopardize its continuing gross and operating margin business that we have today. So the businesses we will keep above the line would really meet Microchip’s metrics. Doug Freedman – Broadpoint AmTech: All right. Very good. I think I'll accept that as a complete answer. Thank you.

And our next question comes from the side of Brendan Furlong with Miller Tabak. Your line is open. Please go ahead. Brendan Furlong – Miller Tabak: Hi, how are you doing gentlemen? Good morning. Thank you. Actually my question was on the quarter, but I'll take a pass on that. On SSTI, my – again, like the previous caller, you'd have to forgive my lack of knowledge on it – but they appear to be predominantly, like, 80% or so exposed like consumer PC, handsets – is that the case, and is that what you're going to target in the future?

Ganesh, you want to take that.

Yes. I think the answer is yes. They have a high exposure into the consumer segment and into the PC segment. As Steve mentioned, I think what we want to understand is how we can find the aspects of the business that have margin characteristics that we would like and that's really where we would focus our energies on.

Let me expand on it. You know, take the microcontroller touch business, our competitors focus on handsets. We have a large touch business with 500 customers in production largely outside the handsets making very high margins. Serial EE business, most of our competitors take the low margin businesses in PC consumer whatever. We have a highly profitable good margin serial EE business. So this is the Microchip’s strength and skill, where we know how to draw the diamond out of the rough, and that's what we've got to do with this business. Brendan Furlong – Miller Tabak: I understand. Thank you very much.

Yes, thanks.

And our next question will come from the side of Harsh Kumar with Morgan Keegan. Your line is open. Harsh Kumar – Morgan Keegan & Co.: Hi, guys, I'm also not very familiar with SSTI. Are you a customer of the licensing technology of SuperFlash from them? And also in the future, as you complete the acquisition, would you let your competitors use that technology? If you can answer that.

I can answer that. So Microchip uses SST technology in many of our products that we develop at the foundries. Microchip had not directly licensed the SST technology for use in our fabs, but we were in negotiations to do so and this way we just own it, we don't have to license it. Harsh Kumar – Morgan Keegan & Co.: And would you let your competitors use it in the future?

Yes, we will keep the licensing business as a stand-alone element business, where their goal would be to really grow the licensing business and license the rest of the foundries and take the advanced technologies and many of our, you know, hard-core competitors in microcontrollers are using SST flash technology, and we will not limit their access to that technology to keep the licensing business pure. It's very high margin makes, you know, 100% gross margin in licensing business. So the goal is – that is the core business in this company and we will help grow it. We have plenty of other avenues to compete with our competitors. We beat them in architecture, we beat them in design, we beat them on cost, we beat them on service, we beat them on design wins. We don't need to limit their access to technology. We will not do that. Harsh Kumar – Morgan Keegan & Co.: Got it. Very helpful. Thank you.

And our next question will come from the side of Uche Orji with UBS. Your line is open. Uche Orji – UBS: Thank you very much. Steve, let me just start out by asking you, are you – from an investor's standpoint, you are now, quite frankly, diverse that is defining [ph] to a memory business.

And what? Uche Orji – UBS: Into a memory business. And fine, it's a product that collaborates with the microcontroller, but it's still a memory business. How – what do you think you can do with this business such that investors do not as awarded [ph] by a multiple, you know, given that you know, in typical memory business, you have all the issues about volatility. In the line business model, you have issues about margin structure. So I know you say it's going to meet the Microchip metrics, but you know, any more ways you can assure us that this will not bring a multiple depressing attributes to your business? That's just something I want to –

Uche, you know, we signed this deal at midnight and you know, in answering those kind of questions you know, there are employees involved, there are customers involved, there are partners involved, and I think you have to be bit more patient, you know, as we develop the integration plans, and more precisely can tell you what goes into the continuing business and what falls below. We've given you some indication. Microchip has been in the memory business for 20 years. We never lost money. You know, we are the most consistent high margin profitable business memory and non-memory. So we know how to do it. So, you know, be patient and give us some credit and if you don't, then so be it. Uche Orji – UBS: Definitely. We will be. Just one more question, Steve. In terms of technically understanding what SuperFlash really brings, is this really more about high density, lower power embedded flash? And I just wanted to, if you can, you know, give us a little bit more insight as to how this product technically stands up against your basic floating gates [ph] non-flash products used by other people, that's just something –

That's a good question. SST’s flash is a much smaller cell size on a given technology than these flash we run internally. Now the flash we run inside is significantly more reliable. We are one of the only competitors, I believe. There may be always others. Whenever we say only, there is a risk of being wrong. Our internal flash doesn't require error correction to go into even the most complex in the liability sensitive applications like automotive. Some of the SST flash applications in automotive, for example, requires an error correction mechanism. So our internal technology leads in reliability, leads in you know, excellent reliability, low power and other stuff. So we address the market inside with our products, which have those characteristics. There are from lower density products, they are from low-power products and other things. Now the microcontroller market is very, very diverse. Everybody doesn't need low power or everybody doesn't need low density, some need high-density but they also need reliability. So SST flash, there are probably more microcontrollers in the world shipped on SST flash than probably on any other technology, probably we can safely say that. So you know, having that in our hands, giving us early access to that technology being able to use it inside as well as at foundries, and being able to create variance of that technology for our own competitive advantage. I think this is a significant benefit for our long term microcontroller business. Uche Orji – UBS: Perfect.

If I would add to that, you know, as we push up and out in terms of the microcontroller market, we continue to add larger microcontroller products, more complex microcontroller products, and have larger amounts of memory. SuperFlash will become an increasing part of how those products get deployed, and the strength of our internal technologies remains a strength for you know, the large percentage of our smaller to medium sized microcontrollers. Uche Orji – UBS: Great. Thank you very much, guys. Thank you.

Welcome.

And our next question will come from the side of John Barton with Cowen & Company. Your line is open. John Barton – Cowen & Company: Thanks, Steve. To kind of follow-up on the last question, and my recollection may be wrong but as I remember it, SST's SuperFlash, one of the biggest advantages for embedded arrays was that the manufacturing steps were the most close to a standard seamless process as compared to other flash technologies. Am I remembering that correctly or not?

Well, I haven't heard any competitors say that their technology is not simple additions to the standard CMOS. I think that's cliché. You know, we can say that about our technology, and I've seen other people's literature say that too. So I honestly haven’t studied it enough to really agree or disagree with that claim. I probably have to look into that. John Barton – Cowen & Company: Okay. And then just one other question, if you could kind of characterize the personality of the merger, if I could call it that – and again, I haven't been watching SST closely, but I believe they were put in play by a private equity buyout. I mean to some extent, I find it interesting that Bing Yeh, the CEO, isn't on this call today or – you know, how do we see it? Is it an acquisition of IP and core engineers? Or how do you think the structure will look post-acquisition?

We have answered an earlier question, I think when people are involved, the personnel are involved, you know, officers are involved, you know, it's just way too early of having signed this deal you know, midnight. We need to you know, sit down and build an integration plan and get into the next detail of you know, products and roadmaps and design pipeline and others, and it's too early to kind of give you any kind of guidance. You know, it will take about two months to close the acquisitions. So by the time we close this acquisition, we should be able to give you pretty good indication of really where we're looking at. John Barton – Cowen & Company: Thank you.

And our next question will come from the side of Jung Hwang [ph] with Millennium Partners. Your line is open. Please go ahead. Jung Hwang with Millennium Partners, your line is open. Jung Hwang – Millennium Partners: Yes. Hi, congratulations on the transaction and thanks for taking my question. Just curious whether you have a voting agreement in place with Mr. Yeh?

Well, I think it is public information that Mr. Yeh had a voting agreement with Technology Resource Holding, which had the first deal the private equity firm, and then he had a second voting agreement in place that is the Technology Resource Holding deal gets terminated, and I think he committed his voting agreement to Cerberus [ph], right. So that is in the public domain. So – Jung Hwang – Millennium Partners: But you wouldn't disclose whether that has changed to you as a counterparty – in terms of – do you have an agreement with him? I mean, he does own a lot of shares. So we're just curious.

Yes, there is nothing I can say. I don't know if anything else is in the public domain. Jung Hwang – Millennium Partners: Okay. And just one follow-up question, what's the breakup fee in your transaction here? Is that standard 2%, 3% of equity value?

The breakup fee in our definitive agreement that will be filed today, right. Jung Hwang – Millennium Partners: Okay.

So SST will file it today. So what's the breakup fee?

3.5%.

3.5%. Jung Hwang – Millennium Partners: Okay. Thank you very much.

I don't want the breakup fee. I want the acquisition to complete.

And we will take our next question from the side of Chris Danely with JP Morgan. Your line is open. Chris Danely – JP Morgan: Hi, thanks guys. It might be a little early to answer this question but, Steve, as I understand, I think SST is entirely fabless. Would you plan to migrate all of this in-house or keep it fabless?

You're correct that SST is a fabless company. We will not be migrating SST's products into our fabs. Obviously, their core business is a licensing business. Beyond that they have a large memory business that we have spoken about. Most of that memory business is at technologies and lithographies [ph], that we're not capable of running enough in our fabs, because you know, those are way to you know, muzelar [ph] driven. So they run at the foundries, and we will continue to run them at the foundries, and then they have some other businesses, they have a small microcontroller business, 1851, a small NAND controller business and others. They're all running at foundries and there are just probably not enough economies to bring them inside. Chris Danely – JP Morgan: Sure. And then is this technology – is this something that you will be injecting into your current PIC/dsPIC line of products? Or will you be creating a whole new line of products?

So many of the PIC/dsPICs and our 32-bit products already use the SST technology. So this would simply give us an additional opportunity to create variance to even expand our product portfolio to take advantage of those technologies even more ways. So you know, foundries give you a standard technology. So it's really hard to get a variant out of that, and Microchip's competitive differentiation and high margins and all that run by, you know, we travel where other people don't. Chris Danely – JP Morgan: Yes, I guess – will this mean the introduction of an entirely new product line? Or we see new PIC 14, 16, 18 new dsPIC product lines, I guess?

The architectures will be the same. We just build around the existing architectures. Chris Danely – JP Morgan: Yes, I got it. That was my question. And then from my last question, you know, I'm just glancing at their financials. And it seems like you're probably going to have to just grab maybe two-thirds, three-fourths of their products to get this thing accretive. I'm just wondering why do you guide, if you're going to get rid of over half the business?

Well, you know, two-third of the business is memory, and you know, I think they break that out in the Q, right. I want to say something that won't break it out. So, you know, a large portion of their business is memory, which is very low gross margin business, but there are portions of that business that we can extract that into our business model, a very serial EE type of very high profitable good margin business model, and that's where we need to get to from where we are. Chris Danely – JP Morgan: Have to you talked to anybody else about potentially buying this thing?

We've been talking to ourselves all this time. Chris Danely – JP Morgan: Okay. Thanks.

It is a deal. So, you know, we were not allowed to talk to anybody, you know, prior to the deal being public. Chris Danely – JP Morgan: No, that – Okay. Thanks.

And we will take our next question from the side of Tim Mahon with Gartner Invest. Your line is open. Tim Mahon – Gartner Invest: Thanks. Hey, Steve, just real quickly on the last 12 months, if you take a look at the technology and licensing line at SST. Do you have any sense what the breakout is between the actual technology licensing and the royalties?

No, we don't break that out and SST does not break that out either. Tim Mahon – Gartner Invest: Okay, thank you.

And we will take our next question from the side of Sumit Dhanda with Merrill Lynch. Your line is open. Eric Ghernati – Merrill Lynch: Yes. Hi, this is Eric Ghernati for Sumit. Thanks for taking my question. Just said that you've – Steve, you have voiced your desire to grow SST's licensing business going forward. And if I look at their financials, their licensing business is down around like 22% from the peak in 2008, and has not grown since 2005, but it's currently at a quarterly run rate of $9.5 million. I guess my question is, how do you believe you're going to go by growing this business, especially when some of the licensees include some of your competitors – Freescale, just to name one? Thank you.

Well, you know, I'm not setting up the numbers that you may be setting, but –

That's the licensing revenue in calendar Q3, last reported numbers.

Yes, so last reported number were $9.5 million licensing business in calendar quarter third. You know, the entire industry was down last year. So if you're comparing anybody's numbers of their last quarter, which was a public quarter was September quarter, you know, that number about a year ago would be down because all microcontroller manufacturers were down year-over-year. The entire industry was down year-over-year. So the numbers would be down. Eric Ghernati – Merrill Lynch: Yes, but it's also flattish from 2006 and 2007?

You know, if we did not understand some of this, you know, this was part of our diligence. We understand how that business has been constructed, what its characteristics are and we have confidence in its ability to grow.

There is a very large design pipeline. Remember these are advanced products. You know, any advanced products that are 2, 2.5 years to production. So there is a very rich pipeline of foundries and our competitors who have licensed these technologies have introduced products, which are going through the incubation period and there is a significant ramp coming ahead. Eric Ghernati – Merrill Lynch: Can you give us a little more granularity on what you just talked about, specifically which product lines, which segments are going to benefit from the –

That business, I can't disclose elements of the business yet. I mean they are announcing their results tomorrow. You can get on, you know, talk to them. We will be able to talk to you in a couple of months when it's our business, but, you know, we can't give you those details. Eric Ghernati – Merrill Lynch: Okay, thank you.

And we'll take our next question from the side of Craig Ellis with Caris & Company. Your line is open. Craig Ellis – Caris & Company: Thanks for taking the question. I just wanted to see if there was any further color you could provide around the sources of accretion in the first full quarter after the deal, whether it's the saving of public company costs or any other items?

It's a large number of things, and again I can't break it out right now. It's too early. I think we need you know, after the dust settles, we need to come back with some more information for our investors. Meanwhile, this has no impact on the March quarter. So our March quarter guidance that we gave you would be clean March quarter of Microchip. We expect to close this deal in early April. So this is a June quarter number and by the time we get there, we'll give you a clean guidance of what will roll up above the operating line, you know, on a non-GAAP basis and then what will be held for sale or what would be below, and so we'll give you very good guidance. Craig Ellis – Caris & Company: Thanks, Steve.

And we'll take our next question from the side of Eric Gettleman with Chesapeake Partners. Your line is open. Eric Gettleman – Chesapeake Partners: Hi, thank you and good morning. Congratulations on the quarter and the acquisition. I had two quick questions for you. The first question was relating to the press releases from this morning on the acquisition itself. One thing that was noticeably absent, given the background of the transaction with SST, in terms of being private equity and part management buyout, was that in the release, it did say that it was approved by both Boards, but it was unanimously recommended by the Independent Strategic Committee – which would lead me to believe that management itself was actually not onboard. And I was wondering if that's a fair interpretation.

I have no idea. You should call them and ask them. I was not there. Eric Gettleman – Chesapeake Partners: Fair enough, although usually, in a press release like that I would assume that you would know if it was unanimous by the Board of Directors of the company?

It was unanimous by the Board of Directors of the company. Eric Gettleman – Chesapeake Partners: Okay. And then the second question I had was just regarding – obviously, there was a dissenting group in the original transaction. And I'm wondering if you've had contact with them to make sure if they're actually onboard with the transaction in this range?

We have not contacted them for obvious reasons prior to this morning. Our name was not known by anybody that we were even one of the party biddings, and no, we have not spoken with anybody. Eric Gettleman – Chesapeake Partners: Congratulations on the quarter and the acquisition, and thank you.

Thanks.

And our next question will come from the side of Romit Shah with Barclays Capital. Your line is open. Romit Shah, your line is open.

Looks like he's gone. Take the next one.

We have no further questions at this time. So I'd like to turn the conference back over to our speakers for additional comments.

Okay, I want to thank everybody for joining the call. We did have some problems starting on our website, IR page wasn't working. It got working five minutes into the call. So if anybody just kind of went away because they couldn't get on, they can listen to the replay. Microchip management would be at Thomas Weisel conference next Tuesday, so we'll take more questions there, and we'll continue the discussion at that time. Thank you very much.

And this concludes today's conference. You may disconnect your lines at any time. Thank you and have a great day.