J. Eric Bjornholt - Chief Financial Officer & Vice President Ganesh Moorthy - President & Chief Operating Officer Steve Sanghi - Chairman & Chief Executive Officer

Vivek Arya - Bank of America Merrill Lynch Craig M. Hettenbach - Morgan Stanley & Co. LLC John William Pitzer - Credit Suisse Securities (USA) LLC (Broker) Harlan Sur - JPMorgan Securities LLC Craig A. Ellis - B. Riley & Co. LLC Christopher B. Danely - Citigroup Global Markets, Inc. (Broker) Rajvindra S. Gill - Needham & Co. LLC Kevin Cassidy - Stifel, Nicolaus & Co., Inc. Mark Delaney - Goldman Sachs & Co. Mark Lipacis - Jefferies LLC

Ladies and gentlemen, please stand by. We're about to begin. Good day, everyone, and welcome to this Microchip Technology Fourth Quarter and Fiscal Year 2016 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time I'd like to turn the call over to Mr. Eric Bjornholt, Chief Financial Officer. Please go ahead, sir. J. Eric Bjornholt - Chief Financial Officer & Vice President: Good afternoon, everyone. During the course of this conference call, we'll 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 releases 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 Chairman and CEO; and Ganesh Moorthy, Microchip's President and COO. I will comment on our fourth quarter and full fiscal year 2016 financial performance, and Steve and Ganesh will then give their comments on the results, discuss the current business environment as well as our guidance, and provide an update on the integration activities associated with the Atmel and Micrel acquisitions. We will then be available to respond to specific investor and analyst questions. I want to remind you that we're including information in our press release and this conference call on various GAAP and non-GAAP measures. We have posted a full GAAP-to-non-GAAP reconciliation on the investor relations page of our website at www.microchip.com, which we believe you find useful when comparing GAAP and non-GAAP results. I will now go through some of the operating results including net sales, gross margin, and operating expenses. I will be referring to those results on a non-GAAP basis prior to the effects of our acquisition activities and share-based compensation. Non-GAAP net sales in the March quarter were a record and at the high end of our guidance at $568.4 million and were up 3% sequentially from net sales of $552 million in the immediately preceding quarter. Non-GAAP net sales were $10.8 million higher than GAAP net sales as we are reporting non-GAAP net sales on a full sell-through revenue recognition basis while GAAP does not recognize revenue on the sell-through of product sitting in the distribution channel on the date an acquisition occurs and when distributor contracts are changed to standard Microchip format compared to the sell-in revenue recognition contracts that Micro previously had for certain of their distribution partners. We have posted a summary of our revenue by product line and geography on our website for your reference. On a non-GAAP basis gross margins were 58.4% in the March quarter, which was above the high end of our guidance. Non-GAAP operating expenses were 27% of sales, below the bottom end of our guidance, and non-GAAP operating income was 31.4% of sales, which was significantly above the high end of our guidance, which was 30.8%. Non-GAAP net income was $153 million resulting in earnings per diluted share of $0.70, which was also above the high end of our guidance. For fiscal 2016 on a non-GAAP basis, net sales were a record $2.214 billion and up 2.5% year-over-year. Gross margins were 58.1%, operating expenses were 27.2% of sales, and operating income was 31% of sales. Net income was $583.3 million, and non-GAAP EPS was a record $2.68 per diluted share. On a GAAP basis net sales were $557.6 million and gross margins were 54.3% in the March quarter. GAAP gross margins include the impact of $1.9 million of share-based compensation, $5.4 million of gross margins impact from the distributor revenue adjustments I mentioned earlier, $18.2 million in acquired inventory valuation costs, and the manufacturing vendor material issues of $3.6 million. Total operating expenses were $222.8 million or 40% of sales and include acquisition intangible amortization of $48.1 million, share-based compensation of $15.4 million, $5 million of acquisition-related expenses and special charges of $0.8 million. GAAP net income was $67.4 million or $0.31 per diluted share. For fiscal year 2016 GAAP net sales were a record $2.173 billion, gross margins were 55.5%, operating expenses were 39.3% of sales, and operating income was 15.2% of sale. Net income was $324.1 million or $1.49 per diluted share. In the March quarter the non-GAAP tax rate was 11% and the GAAP tax benefit rate was 16.9%. The non-GAAP tax rate does not reflect a $12.3 million benefit or non-recurring items associated with the tax audit settlement and other matters. Including Atmel, we expect our longer term forward-looking non-GAAP effective tax rate to be between 8% and 9%. Moving on to the balance sheet, our inventory balance at March 31, 2016 was $306.8 million. Excluding the purchase accounting adjustments flowing through the income statement, Microchip had 117 days of inventory at March 31, 2016, which is down by three days from the levels at the end of the December quarter. Excluding purchase accounting adjustments, inventory at our distributors was 32 days, which is down two days from the December quarter levels. I want to remind you that historically, Microchip's distribution revenue throughout the world has been recognized on a sell-through basis. Atmel had a mixture of sell-in and sell-through revenue recognition in its distribution channel. Our non-GAAP revenue guidance provided in our release today is based on sell-through revenue recognition for the Atmel distributors for the entire June quarter in order to continue to provide investors with the view of the true end market demand for our product. There will be a difference in GAAP revenue recognition as the inventory in Atmel's sell-through distribution channel at the date of the acquisition will not be recognized as revenue for GAAP accounting purposes and also because some of the contracts with the Atmel distributors drive sell-in revenue recognition for GAAP accounting purposes. The cash generation in the March quarter excluding our acquisition activities, our dividend payment, and changes in borrowing levels under our revolving line of credit was a record $196.3 million. This includes a $22 million cash benefit from unwinding the interest rate swap that we had in place. The swap was unwound as our natural hedge of floating rate debt went away by utilizing our cash to fund the Atmel acquisition. As of March 31, the consolidated cash and total investment position was $2.665 billion; our borrowings under our revolving line of credit as of March 31 were $1.052 billion. Excluding dividend payments, changes in borrowing levels, and our acquisition-related activities, we expect our total cash generation to be approximately $140 million to $160 million in the June quarter. Capital spending was approximately $16.5 million in the March quarter and $97.9 million in fiscal 2016, well below the $110 million forecast we provided on our last earnings call. We expect about $35 million in capital spending in the June quarter and overall capital expenditures for fiscal year 2017 to be about $140 million, including Atmel. We are selectively adding capital to support the growth of our production capabilities for our fast-growing new products and technologies and to bring in-house more of the assembly and test operations that are currently outsourced. Depreciation expense in the March quarter was $26.2 million and $103.9 million for fiscal year 2016. I will now ask Ganesh to give his comments on the performance of the business in the March quarter. Ganesh? Ganesh Moorthy - President & Chief Operating Officer: Thank you, Eric, and good afternoon everyone. Today I'll give you a summary of our product line performance and then provide an update as to where we are with the Atmel integration from a product line perspective. Let's take a closer look at the performance of each of our product lines starting with microcontrollers. Our microcontroller revenue was up 5.5% in the March quarter as compared to the December quarter as we experienced a broad-based recovery in our business. All three businesses – 8-bit, 16-bit, and 32-bit microcontrollers – were sequentially up with the 16-bit and 32-bit businesses being up in double-digit percentages. Microcontrollers represented 59.9% of Microchip's overall revenue in the March quarter. Gartner Dataquest just released their microcontroller market share report for 2015. We are pleased to report that Microchip retained the number one position for 8-bit microcontrollers and once again gained market share in 2015. In the 16-bit microcontroller market too, we continued to gain market share, while in the 32-bit microcontroller market, our market share was about flat. The microcontroller market share data reported by Gartner is getting increasingly volatile, driven by the inclusion of smart card and NFC revenue, and is further exacerbated by our belief that this data is inconsistently reported by the company's survey. Smart card and NFC revenue has no bearing on the broad-based microcontroller market, which is a much more resilient and profitable business and where Microchip participates. We remain pleased with the performance and competitiveness of our 8-bit, 16-bit, and 32-bit microcontrollers in the broad-based market. Our overall microcontroller results are outperforming the market in a very competitive environment, and these results are a tribute to the relentless effort by the worldwide Microchip team. We have gained market share and we have a new product momentum and customer engagement to continue to gain even more share as we further build the best-performing microcontroller franchise in the industry. The addition of Atmel microcontrollers to our portfolio will further strengthen our position and performance in the microcontroller market. Moving now to analog products, our analog business was about flat in the March quarter as compared with the December quarter, and was up 34.6% compared to the year-ago quarter. In fiscal year 2016, which ended on March 31, our analog business was up 26.3% as compared to fiscal year 2015. The strong growth and increase in market share in fiscal year 2016 was a result of our organic growth efforts as well as the Micrel acquisition. Our analog business represented 30.2% of Microchip's overall revenue in the March quarter. We continue to develop and introduce a wide range of innovative and proprietary new linear, mixed-signal, power interface, and timing products to fuel the future growth of our analog business. Moving now to our memory business, which is comprised of our Serial E-squared memory products as well as our SuperFlash memory products, this business was down 1.8% in the March quarter as compared to the December quarter. We continue to run our memory business in a disciplined fashion that maintains consistently high profitability, enables our licensing business, and serves our microcontroller customers to complete their solution. Our Memory business represented 4.8% of Microchip's overall revenue in the March quarter. Now, an update about Atmel and where we are in the integration process. Since the close of the acquisition on April 4, we have spent considerable time understanding Atmel's businesses, organization, and systems. We're developing detail integration plans that are in various stages of completion. Where we've decisions made we begun to execute those plans while we continue to build and refine integration plans in other areas. Specific to the product lines here is where we're with our integration. We have combined Atmel's 8-bit AVR microcontroller business along with Microchip's 8-bit PIC microcontroller business under a single leader. The 8-bit AVR microcontroller, which is still very popular among a broad base of engineers, had atrophied under Atmel over the last five years as resources were diverted to touch and 32-bit microcontrollers. That stopped on April 4 as we reprioritized resources to reinvigorate the iconic AVR microcontrollers to drive growth. We expect to release a steady stream of innovative new AVR microcontrollers over the next 12 months that will lead its resurgence even as we continue to release a steady stream of innovative new 8-bit PIC microcontrollers. We have also combined Atmel's SAM 32-bit microcontroller and 32-bit microprocessor business along with Microchip's 32-bit microcontroller business under a single leader. 32-bit microprocessors, by the way, are a new product category for Microchip and are typically higher-performance and complex embedded control solutions. Unlike microcontrollers, which are Flash memory on chip, microprocessors have no Flash memory on chip and instead use much larger external Flash memories. Microchip had a PIC 32 microprocessor program, which was in its early stage of investment, and we have decided to terminate that investment as we can capitalize on Atmel's SAM 32 microprocessor roadmap, which is more advanced and already in significant revenue stage. Looking forward, we expect to continue to develop new SAM 32 and PIC 32 products exploiting specific areas of specialization that each company had carved out over the years while streamlining and harmonizing the technology and intellectual property building blocks that each will use. We have combined Atmel's wireless business and Microchip's wireless business under a single leader. The product lines have some overlap and roadmaps are in the process of being rationalized to bring the investment in line with what is appropriate for the business. In that light, one decision we made was to close Atmel's Dresden wireless development center in mid-April. There is more wireless investment rationalization that is left to do. We have combined Atmel's memory business and Microchip's memory business under a single leader. The product lines offer many substitutable products and while we will continue to support both product lines for any customer who cannot switch, for the great majority of the customers we will converge to a best-of-breed product which has the lowest overall cost and best overall customer value. We have also begun rationalizing the going-forward R&D investment to eliminate redundant projects either at Microchip or at Atmel. Atmel's touch business is in the process of being restructured into mobile and non-mobile, which is essentially the automotive and industrial businesses. We have identified the leadership structures required for two independent businesses. As we announced on April 4, the automotive and industrial touch business will stay with Microchip in the long run while the Mobile Touch business will be sold. We expect to have the two organizations in place sometime in this quarter and to begin marketing the Mobile Touch business soon after. Atmel's security solution business consists of a number of Crypto products. This is a newer field of play for Microchip and Atmel's offerings will add to and strengthen our security offerings as well as accelerate some of the solutions that Microchip had planned to independently develop. Steve will comment in more detail in his section about how we expect to see the accretion results roll out. Finally let me provide an update on Atmel's acquisition – on the Atmel acquisition in regards to our product line reporting. Atmel's standard microcontroller revenue including the automotive and industrial touch microcontrollers will be reported as part of Microchip's microcontroller product line. Atmel's analog revenue, which is predominantly made up of products for the automotive market will be reported as part of Microchip's analog product line. Atmel's memory revenue will be reported as part of Microchip's memory product line. Atmel had a product line called multi-market, which included the aerospace business, the legacy CPLD business, and their foundry services business. Microchip will adopt multi-market as a product line we report and we'll roll the revenue from our historical other product line, which consisted of manufacturing services, into this multi-market product line. Further, Atmel also has some legacy ASIC microcontrollers comprising either discontinued products, or products which had not had any investment for many years. We intend to include revenue from these products in the multi-market product line as well. As we mentioned during our April 4 conference call, Atmel's Mobile Touch business will be classified as an asset held for sale and we will only report the net profit or loss for this business below the operating line of Microchip's income statement. Let me now pass it to Steve for some general comments about our business, our guidance going forward, and some more about the Atmel integration. Steve? Steve Sanghi - Chairman & Chief Executive Officer: Thank you Ganesh and good afternoon everyone. Today, I would like to first comment on the results of the fiscal fourth quarter of 2016 and then provide guidance for the fiscal first quarter of 2017. I will also make comments on the progress of integration for Micrel and the newly acquired Atmel. Our March quarter financial results were very strong amidst a weak semiconductor industry backdrop. We achieved the high end of our net sales guidance, establishing a new record in the process, and we exceeded the high end of the guidance for non-GAAP gross margin percentage, operating profit percentage, and earnings per share. Our non-GAAP earnings per share was sequentially up approximately 11% from the December quarter due to improving sales, gross margin, and operating expense leverage. I hope that emphatically demonstrates the operating leverage left in our premium business model. Before I go into guidance, let me give you a brief update on the integration of Micrel and Atmel. On Micrel, we are essentially in the final stages of completing the integration. The two items remaining are both in the manufacturing area. The integration of backend operations into Microchip Systems is on schedule for August. The other item is the closing of the fab, and we have an update on that. We could have closed Micrel fab in August by building a large amount of inventory for the customers to switch to Microchip's 8-inch fabs. But as we have analyzed options after the Atmel purchase, we believe that a couple of processes are better transferred from the Micrel 6-inch fab to Atmel's 6-inch fab in Colorado Springs. This will require less inventory and result in lower risk to the customers and business units. Therefore, we are transferring the process to Atmel's fab, and we will structure the Micrel fab to a very small operation largely running a couple of those processes until they are qualified in the Atmel fab. We believe this will delay the final close of the Micrel fab by four months to December of 2016. The financial model of Micrel is starting to look very good. Recall that when we purchased Micrel about nine months ago, it was making a gross margin of 48.4% and the operating profit was 6.7% of revenue. In the December 2015 quarter, we achieved 49.5% gross margin and 18% operating profit from Micrel. I'm happy to report that in the March 2016 quarter, we achieved 53.2% gross margin and 22.8% operating profit from Micrel. We now believe that after we close the fab, the final operating profit model for Micrel will exceed 30% and will be above our original model. By the way, Supertex integration is complete. Final result: gross margin in the high 60s, and the operating expenses are really intertwined, so harder to decipher. But safe to say that the operating profit is in the 30s. Now, regarding Atmel, Ganesh provided the progress report on the integration of product lines of Atmel. There's not a whole lot more beyond that with just one month gone. We're in the process of cross-franchising Microchip and Atmel distributors, and we're sorting through all the overlaps in rep coverage in major accounts. I will now provide guidance for the June 2016 quarter. We started out June quarter with a stronger backlog than we had going into January, and the bookings and turns for the quarter so far have been strong. The Chinese New Year holidays in Asia are also behind us, although this is traditionally a slower quarter in Europe. Based on our analysis of economic and semiconductor industry conditions as well as our own business indicators, we are guiding the March quarter net sales without Atmel to be up between 1% to 5% sequentially or between $574.1 million and $596.9 million. We expect the non-GAAP gross margin, again without Atmel, to be between 58.2% and 58.6% of sales. We expect non-GAAP operating expenses to be between 26.3% and 26.6% of sales. And we expect the non-GAAP operating profit to be between 31.6% and 32.3% of sales. We expect our non-GAAP earnings per share without Atmel to be $0.70 to $0.74 per share. With this, let me now provide guidance for attrition from the acquisition of Atmel. There are two items that we need to be mindful of as we look at guidance for Atmel's net sales. First, while Atmel reported its net sales based on sell-in revenue recognition to distributors in Asia, Microchip will report Atmel's non-GAAP sales based on a sell-through revenue recognition worldwide. Secondly, Microchip will report the Mobile Touch portion of Atmel's business as an asset held for sale and will report this business unit's profit or loss below the net operating profit of Microchip and will exclude this net profit or loss for non-GAAP purposes. Now, based on that, we expect Atmel to add approximately $225 million to $245 million in net sales for the continued businesses. We expect the continuing business of Atmel to be between 46% to 47% in gross margin, and we expect the Atmel subsidiary to be between 0 to $0.05 accretive to Microchip's non-GAAP earnings per share. So now, let's combine the guidance for core Microchip and Atmel. We expect June quarter net sales to be between $799.1 million and $841.9 million. We expect non-GAAP earnings per share to be between $0.70 to $0.79 per share. We continue to expect that Atmel will be about $0.25 accretive to Microchips non-GAAP earnings per share in fiscal year 2017. In closing, I would like to say that March quarter marks the start of the growth period for us after ending the inventory correction in the December quarter. In case of Atmel, the inventory on the balance sheet and the distribution inventory is still high and there is still some inventory correction to go through that is baked into our guidance. Combining growth from our core business, further accretion coming from Micrel, and the accretion from Atmel, this triple effect will set up the earnings growth momentum that we expect will lead us to an 18% non-GAAP EPS growth from fiscal 2016 to fiscal 2017. With this, operator, will you please poll for questions?

Yes, sir. Thank you. And we first move to Vivek Arya with Bank of America Merrill Lynch.

Hi. Thank you for allowing me to ask question. This is Shankar on behalf of Vivek. On the Atmel business, can you talk about the growth in the various segments that you have analyzed after you acquired? Which are the segments you think is going to grow and how do you think you're going to position your products along with their products and strategically grow both product lines? J. Eric Bjornholt - Chief Financial Officer & Vice President: It's a little early for all the growth areas. Obviously we're coming up to speed in the different businesses. The investment roadmaps have been what they were. They were focused on 32-bit in touch alone. There wasn't as much on 8-bit. We see that as a potential area of growth for us going forward. There is some growth we believe in security, certainly in the microcontroller – 32-bit microcontroller and wireless areas that they have invested in. It's a little early to give you any specific numbers. We're working on that. We also have to look at how to balance that with investments Microchip has also been making in similar areas. So that's with respect to growth. On the positioning, I think we've very clear ways in, which products have areas of strength that they have developed. On 8-bit the AVR has a strong following a wide base of customers and applications, and so does the PIC microcontrollers. The biggest opportunity on that is going to be how do we take our analog products and create more attach around both company's efforts? Obviously we've been doing that on 8-bit for a long time now doing it for the AVR 8-bit as well. On 32-bit, microprocessors is an area that Atmel had as a strength. We hadn't been doing it. We will take that and run with it, and again, position the rest of our product lines to attach with their microprocessors. We expect on the microcontrollers that are ARM based as well as MIPS-based microcontrollers that will have PIC 32 and SAM 32 products. They each have different uniqueness around them have gone after slightly different markets. In some cases there could be commonality of customers. And so largely, on the microcontrollers, we're not expecting that these big shakeups in the roadmap. And then outside of microcontrollers really the rest of the product lines are reasonably well positioned. Vivek Arya - Bank of America Merrill Lynch: Got it. Just as a follow-up on the synergies from Atmel acquisition could you provide a split-up between how much will come from the COGS side things and OpEx side of things for fiscal 2017 and then maybe in out years will that incrementally be more on the COGS side or the OpEx side? Steve Sanghi - Chairman & Chief Executive Officer: We are not able to break down the synergies in OpEx or the COGS side or revenue growth. We've given combined numbers of the earnings per share accretion for fiscal 2017, 2018, and 2019 and you know a month after the acquisition as we've looked at it we're pretty much confirming that we can achieve those numbers. Vivek Arya - Bank of America Merrill Lynch: Okay. Thank you.

Next question comes from Craig Hettenbach with Morgan Stanley. Craig M. Hettenbach - Morgan Stanley & Co. LLC: Yes, thank you. Just a question on kind of the IoT piece of business, Steve. If you can just touch on you know how you're seeing design activity there and the relative growth of those type of products versus the overall MCU business? Steve Sanghi - Chairman & Chief Executive Officer: Well, our wireless business has been doing quite well for quite some time. And honestly, we're surprised about where Atmel got some of the reputation on being well positioned in IoT. As we looked at it now closer as we own it, the wireless business was less than half of Microchip's business and losing a very large amount of money. So we are dramatically restructuring Atmel's wireless business, combining with our wireless business, and coming up with a combined roadmap – some products from us, some products from them. In fact, just today we closed one of the design centers of their wireless, which was based in Dresden, Germany. But Microchip had a very strong momentum on wireless, and taking some of the good products from Atmel, it will further aid to it. But their wireless business wasn't really cracked up to really what they positioned it with the analysts and investors. Craig M. Hettenbach - Morgan Stanley & Co. LLC: Got it. And then just as my follow-up for a comment on just the current environment. As you mentioned, this is a sort of growth period for you. Any anecdotes you can kind of point you in terms of as you made your way through the inventory correction, whether it's customer behavior or distributors, and how the business is being managed? Steve Sanghi - Chairman & Chief Executive Officer: Are you talking about Microchip's core business or Atmel's business? Craig M. Hettenbach - Morgan Stanley & Co. LLC: Microchip's core. Steve Sanghi - Chairman & Chief Executive Officer: So our business is running normal. We completed the inventory correction back in December quarter. As we reported, the distribution inventory was basically flattish. It was down by two days last quarter. Our internal inventory seems reasonable. So I don't really think there's movement going in either direction. I think the business is really normal. Our business represents the real demand today. Craig M. Hettenbach - Morgan Stanley & Co. LLC: Got it. Thanks.

Next question comes from John Pitzer with Credit Suisse John William Pitzer - Credit Suisse Securities (USA) LLC (Broker): Yeah. Good afternoon, guys. Thanks for letting me ask a question, and thanks for all the detail of the conference call. Steve, I guess my first question is if I adjust for the Mobile Touch business at Atmel, it looks like the June guide is sort of implying flat to down kind of 8%, maybe like down 4% at the midpoint. I'm just kind of curious to what extent do you think this is just a hangover of some of the distribution inventory problems you had versus maybe a portfolio that wasn't as strong as you had originally thought? And I guess, importantly, when do you think you get the core Atmel business back to some level of sequential and year-over-year growth? Steve Sanghi - Chairman & Chief Executive Officer: So, there were probably more than one question in there, but the Mobile Touch business of Atmel that we didn't include is about $14 million a quarter. So if you add it to the midpoint of our guidance that we provided, it's about $250 million. So it's really neither way up or down much. We basically feel that Atmel was in the middle of a very major inventory correction. There was a very, very large amount of distribution inventory as well as the inside inventory. We have seen some of that behavior with sell-in driven companies in our prior acquisitions also, but this one was really over the top. As we announced back on April 4, that – based on a sell-in driven revenue recognition, the revenue was only in the $220 million range. So there was really a massive inventory correction in distribution. If they were standalone then the revenue would just have been very, very low. And I think the second part of your question was when do we see growth. We believe we see stabilization beginning now, and it continuously improves. We are improving Atmel's systems on many different fronts, and you'll see the second half of this year to be significantly better than what you've seen in the first half. John William Pitzer - Credit Suisse Securities (USA) LLC (Broker): That's all for Steve. And maybe for my follow-up I know this doesn't impact the non-GAAP guidance you gave, but when you report sort of the below-the-line loss or gain from the Mobile Touch business, did you expect that business to be profitable? Is it a loss? And how we think about getting rid of that business relative to your accretion targets for Atmel? Steve Sanghi - Chairman & Chief Executive Officer: Okay. So the business is about $14 million in revenue, low-30s gross margin, and 33% range kind of gross margin, and it's losing money. And part of the issue is its expenses are extremely high and kept high by Atmel management, while the revenue was falling steeply down over the last year and the year before. So what we are doing is very, very aggressively cutting its operating expenses to size the business accordingly to get it close to profitability. And with that, we will market that business to be able to sell it. John William Pitzer - Credit Suisse Securities (USA) LLC (Broker): Helpful. Thanks, guys.

Next question comes from Harlan Sur with JPMorgan. Harlan Sur - JPMorgan Securities LLC: Good afternoon and nice job on the quarterly execution. Your 16-bit and 32-bit businesses grew double digits sequentially in March. It's pretty solid results in a tough demand environment. I know you say broad-based, but any color, geography or end market-wise, as to the strong growth drivers? I know automotive continues to be an area of strength, but any color you can provide will be appreciated here. Ganesh Moorthy - President & Chief Operating Officer: There's nothing I can point my finger to and say this is what it was. Both businesses are like our overall microcontroller business. They are broad-based, thousands of customers, many, many, many different applications. And that work takes place over the years to establish those new designs. And as any overall improvement environment happens, we see that improvement in our business across a wide range of applications and customers. So nothing specific I can point to. Harlan Sur - JPMorgan Securities LLC: Okay. Thanks for that. And then I know the team had previously mentioned that China did not fall off a cliff in the March quarter. It's maybe the market (37:02). Is the team expecting the core Microchip China business to grow in the June quarter? Again auto in China appears to be an area of strength. I know you've got broad-based exposure here, but again, any areas in China that you're seeing strength? Is it more just inventory replenishment or do you think that is true demand pull? Steve Sanghi - Chairman & Chief Executive Officer: Well, yes, absolutely. Our June quarter business in China will be up sequentially over the March quarter. We were not able to break down by industry because we just don't roll up the revenue that way. It's broad-based. We are up in direct. We are up in distribution, so it's really fairly broad-based. Our China business will definitely be up in the March quarter. Harlan Sur - JPMorgan Securities LLC: Great. J. Eric Bjornholt - Chief Financial Officer & Vice President: It's really always up in June following the Chinese New Year funk that happened in the March quarter. So it's just a higher number of shipping days, but the demand environment is fine. Harlan Sur - JPMorgan Securities LLC: Great. Thanks for the insights. Steve Sanghi - Chairman & Chief Executive Officer: Welcome.

Next question comes from Craig Ellis with B. Riley. Craig A. Ellis - B. Riley & Co. LLC: Yeah. Thanks for taking the question, and congratulations on the nice job in the quarter. Steve, I wanted to start off with a higher-level question. The team has had four weeks to be on the inside of the Atmel business. Could you summarize for us what your biggest takeaways are now that you're on the inside looking at that business versus what you thought you were getting when you closed the deal a month ago? Steve Sanghi - Chairman & Chief Executive Officer: That's a thoughtful question and probably requires a thoughtful answer. I think if you take it from the high level, in consolidation of any industry, there are companies at the bottom that have been underperforming for years. They are being forced by either their boards or the activists investors to seek strategic alternatives, which is another word for basically selling the company. Such consolidation is now taking place in the semiconductor industry, and we have been kind of one of the consolidators. Microchip has purchased a number of companies that were all underperforming, and in each of these companies we found some negative surprises after we bought the companies. But Microchip has systematically transformed the companies that we have bought into highly profitable enterprises performing in the Microchip business model. I've given you examples of SMSC, Micrel, and Supertex before. And we believe that we'll be able to do the same with Atmel. We have competed Atmel for years. What we knew of Atmel from outside was that they have very good products and technology. And a month after we have purchased them we've confirmed that many of Atmel's product and technologies are good, and they fit very well with Microchip's products, technologies, and our roadmaps. But at the same time, we always wondered why Atmel, with such good products and technologies, always underperformed and could not make even a third of the profit that Microchip made. We now have a deeper understanding of that. And the easiest way to describe that is they were very poorly managed. I will put that in five main buckets. First, very poor accountability for results. I mean, kept giving bonuses and raises or whatever, irrespective of the performance of the company. So very poor accountability for results. Number second, poor teamwork. As we have seen, teamwork between sales and operations and planning and inventory and just everybody does what they need to do, and very poor teamwork. Number three, very high spending culture. Obviously, operating expenses in excess of 40% of revenue. Number four, always swinging for homeruns and essentially getting struck out, versus Microchip building its businesses with singles and doubles. And finally, number five, very poor pricing discipline. So I think those are the five areas we've diagnosed. Again, poor accountability for results, poor teamwork, very high spending culture, swinging for fences for the homeruns, and very, very poor pricing discipline. So we have now combined most of Atmel's business units under Microchip leaders so that we can begin to teach and implement our system of teamwork, accountability, operating expense, discipline, broad customer base, and strong pricing discipline. As we have done with SMSC, Supertex, and Micrel, we'll be sharing that progress with the investors and analyst in the coming quarters. Atmel is not the first company and that I've been stressed over after purchasing them, but I'm confident that just like in other cases investors will like the results we deliver as we transform Atmel's good products and technologies to yield kind of Microchip kind of financial performance. So that's kind of how I see it. Craig A. Ellis - B. Riley & Co. LLC: Thank for that detail. The follow-up question is one related to prepared comments, and it deals with integration, some of the operational aspects of the new business, and it's in regards to the distribution channels and the sales teams. How long does it take to do a full cross selling training on each of the portfolios with the different channels and when do you expect to start to get the design win synergy off of that cross training? Steve Sanghi - Chairman & Chief Executive Officer: I would say it takes about three months to launch it, another six months to train it, and you start getting design wins in the second half, probably, after six, seven months. And then remember, production is another year, year and half, away at some earlier wins on analog and attach and places where the time to revenue could be shorter. Craig A. Ellis - B. Riley & Co. LLC: Thanks, and the last question is for Ganesh. Ganesh, I appreciate the careful walk through the product groups and the way Atmel is integrating with Microchip. I didn't hear you mention the 16-bit business. Where does that fit as the portfolios come together under either standalone leadership or leadership with one of the groups you did mention? Ganesh Moorthy - President & Chief Operating Officer: Okay. So, that's easy. There was no 16-bit business at Atmel. Microchip's 16-bit business continues as a standalone business. Craig A. Ellis - B. Riley & Co. LLC: Thanks, guys.

And we next move to Chris Danely with Citigroup. Christopher B. Danely - Citigroup Global Markets, Inc. (Broker): Hey, thanks, Steve. I was going to ask a lot of questions but your response to the last prompted to me ask this one. So with Atmel's culture being pretty screwed up, A, have you had an acquired company that's been this bad? And, B, if you could share any anecdotes, and then perhaps talk to us about how long you think it will take get things in line there? Steve Sanghi - Chairman & Chief Executive Officer: Well, I think I kind of have been on record that this is probably the worst performing company I bought, and the size and scale of it kind of makes it that much more challenging. But we've a deep experience inside of Microchip. The people we have prepared and battle-hardened to do these integrations over many, many different acquisitions. Remember, we have done acquisition in memory, which was SST. We've done acquisitions in wireless before. We have done acquisitions in logic businesses like SMSC. We have acquired manufacturing assets before where we bought one of the test plant MMT. We bought a fab plant in Oregon. So across our diverse management structure, we have deep expertise in integrating acquired companies across many, many disciplines. And the entire – that trained and battle-hardened management team of Microchip is really at work at Atmel where essentially all but one or so of the divisions are today – business units are being led by a Microchip executive, and we're basically making the operational changes, the cultural changes, the teamwork changes. We have set up meetings already where operations and business units are in a common meeting, figuring out what the demand is, what we should build. Those things were not connected. Basically, business units throw a demand over the wall and the manufacturing group will invent and build it, and sales never booked that order and never won that design, and there are lots and lots of millions or parts sitting written off. And there was a very, very high amount of inventory write-off at Atmel when we look at the history of that. And it doesn't compare anything with Microchip where we are really well run, and rare that you have any kind of large inventory write-off. So we're implementing all of Microchip's processes, and as we implement Microchip's processes, then lot of the gross margin and other improvement will just happen because you don't write off the inventory, there's a better pricing discipline, there's less OpEx, and people are working together, all that kind of stuff. Ganesh Moorthy - President & Chief Operating Officer: Chris, I will also add there are lots and lots of great employees at Atmel, so, many of whom were yearning for an improvement in system and who are responding extremely well to our presence, our values. And so – we've seen this in other companies as well, that once you go below the top level, there are lots and lots of excellent employees who will be a big part of the contribution as we bring in the improvements that we need to make. And we already see lots of those people are thrilled to be liberated and to be able to thrive in the systems that we bring. Steve Sanghi - Chairman & Chief Executive Officer: We always say that management works on the system and employees work in the system. So employees work in a system with very little accountability and they were not empowered to really make, maybe possibly, the improvements that they could have made. And system was very top-down; there was too much bureaucracy in the system. As we have traveled to all the Atmel sites internationally, in places, that team has constantly come that there was so much central command and control from the headquarter where it took levels and levels of approvals and just there was a constipation of the funnel, essentially, where nothing got approved and nothing got done. And ours is a very distributed intelligence and distributed decision-making, and people empowered, where they work by our values. They know what they need to do, And so lots of people as we've travelled from Norway to France to Germany to Colorado Springs to other have really embraced us and said this is the kind of culture they have been yearning for. Christopher B. Danely - Citigroup Global Markets, Inc. (Broker): Great. Thanks, guys.

Next question comes from Rajvindra Gill with Needham & Company. Rajvindra S. Gill - Needham & Co. LLC: Yes. Thanks for taking my questions and congratulations as well. This is a question with respect to Atmel's growth rate, and I think you touched upon it a little bit. But just want to get some more clarity. If you look at Atmel's revenue in 2015, it declined about 17% year-on-year, roughly. Now, there were a lot of one-time items that were contributing to that fall you've calculated. But I wanted to get a sense of kind of how you're looking at Atmel's three-year or long-term growth rate, putting aside some of the one-time events that occurred in 2015 and given the fact that two thirds of Atmel's revenue is really microcontrollers and your strategy of really kind of focusing on the two-thirds of the business. How do we look at kind of Atmel's longer-term growth rate? Steve Sanghi - Chairman & Chief Executive Officer: Well, I think any answer we give either would mean nothing, or you won't believe it. So one month after this, when I'm ready to talk about what happens to Atmel's revenue three years from now? What we're seeing is that there was a very, very large shipments into distribution where distribution inventory was out of sight and when you then measure revenue by selling the revenue had a steep fall off in the later quarters, which is what you're counting in a significant revenue drop of Atmel in 2015, and I'm not disagreeing that the revenue was down 17%, 17.5%. From the number that we're guiding you today we see this number to be the starting point of stabilization in Atmel's revenue. There is some more distribution inventory correction to go through, so the second half of this year should be stronger than the first half. Now, beyond that, with the better execution, combined roadmap, the good pricing discipline, great distribution methodology, our cross-selling distributor on each of those products, analog attach, and others, we need to produce a growth rate from Atmel which is at least as much as the industry. I don't think that will be that difficult from how atrophied it is. And we've seen that in our other acquisitions. Beyond that I can't really add the numbers to it. Rajvindra S. Gill - Needham & Co. LLC: Well, that's helpful, at least in terms of the thought process. Just following up, again, the microcontroller business is – put aside the changes in the revenue recognition – is roughly two-thirds of the Atmel's business. And then you have obviously the non-volume memory, RF auto, and multi-market.... Steve Sanghi - Chairman & Chief Executive Officer: So it's not true that we're only focusing on the microcontroller business. We have two of our general managers focusing on the microcontroller business, one of 8-bit and one on the 32-bit. But we have another one focused on wireless. We have another one focused on the RF automotive business. We have another one focused on security. We have another one trying to combine the memory businesses of both the companies and they have some good memory products and we think we could do more and better with them. So I can't afford to ignore one-third of any business and.... Rajvindra S. Gill - Needham & Co. LLC: No. I understand it. I'm just doing the math in terms of sensitivity. Every 250 basis points change in the microcontroller business has 180 basis point impact on revenue growth. And as you do – the same number, in terms of the one-third of the business only have 80 basis points. So that's what I'm just trying to get a sense of your thought process there? Steve Sanghi - Chairman & Chief Executive Officer: Yes. So the business has been declining so far with the March quarter as the bottom. And what we're trying to do is first to stabilize it here, recover from the distribution inventory issue in the second half, grow some, and then lots of good design wins are in the works. Ganesh Moorthy - President & Chief Operating Officer: The products and technologies are fundamentally good. and so we believe that a good foundation from which to begin the efforts needed to grow the business. There's every confidence that as we take those products, apply some of the disciplines that Steve talked, about get them into a combined channel, there's no doubt in my mind we'll find ways to grow that business. Rajvindra S. Gill - Needham & Co. LLC: Great. Thank you.

The next question comes from Kevin Cassidy with Stifel. Kevin Cassidy - Stifel, Nicolaus & Co., Inc.: Hi. Thanks for taking my question. I just want to talk about the CapEx, your plans. It seems it's extremely low as a percentage of revenue. Is that just good timing or you expect that to expand in coming years or – and what is the CapEx (54:26) Steve Sanghi - Chairman & Chief Executive Officer: I guess I'd say we have the factory footprint that we need and we'll make incremental investments in the business as required. You'll probably recall that for Microchip's core business that we've pretty high CapEx in the first two quarters of last fiscal year, and with that we put some capacity in place that really isn't being utilized today. So we've got some capacity to grow into on that front. We still have a lot of work to do in determining how backend integration is going to work for Atmel. We've got some placeholders for that, but we think a $140 million is a good placeholder for the current fiscal year, and as we learn more about future investment needs we can update you on that. Steve Sanghi - Chairman & Chief Executive Officer: And Atmel revenue is down much more substantially. I mean our revenue is close to – it was record last quarter, but Atmel's revenue is down significantly from its higher numbers before. Earlier caller mentioned that 17% drop last year. So there is substantial space in their factories. So therefore, I think the capital investment should be relatively limited for growing the revenue going forward. Kevin Cassidy - Stifel, Nicolaus & Co., Inc.: Okay, great. Thank you.

Next question comes from Mark Delaney with Goldman Sachs. Mark Delaney - Goldman Sachs & Co.: Yes. Good afternoon and thanks very much for taking the question. I was hoping I could better understand some of the dynamics around the Atmel revenue. And there was some discussion in some of the online publications around some of the larger customers potentially taking business away from Atmel post merger. And I was hoping you could clarify if any of the decline in Atmel's revenue is some of these larger customers may be taking business elsewhere. Steve Sanghi - Chairman & Chief Executive Officer: So I think I mentioned that Atmel had a very, very poor pricing discipline. So we have found businesses in Atmel, particular line items to particular customers, that were at negative gross margins where you're wrapping money around every part that you're shipping, and some of that happening even on non-commodity products, even microcontrollers. I mean, why would you do that? So I think as we try to correct those things – I put the brand in three different categories, three different positioning, and let me take that angle from a marketing standpoint. A company has a brand position which is really what do the customers think of the company. Then a company has a product position, positioning where – what does the customer think of the company's products. And then the third, a company has a pricing position where what do the customers think of the value the company provides to the customers on its products. So positioning is important three different ways: brand positioning, product positioning, and pricing positioning. When I look at Microchip, I find us very strong in all three. We have a good brand reputation, we have a good product positioning, and we have good pricing positioning where we're able to draw very, very good pricing by customers seeing the value in our products. That's how we make near 60% gross margin. When I apply the same principles to Atmel, I find they have a good product positioning. And Ganesh and I mentioned that we find good products. The company probably has just an okay brand position as a company but it has a very poor pricing positioning, where it hasn't positioned its products to be able to show the value to the customer. And they sell them like... Ganesh Moorthy - President & Chief Operating Officer: Jellybeans. Steve Sanghi - Chairman & Chief Executive Officer: Like jellybeans. So as Microchip starts to put the discipline in place and there are common customers where we do business with and they're same customers that Atmel does business with – and you've read something in paper where some ex-executives blabbering about and being pissed off or whatever because they no longer have a job or there cheese has been moved. But all these customers are doing business with Microchip. And they're doing business with Microchip. We're able to position our products at a much higher value, and we have substantially higher gross margin at the same customers where Atmel has a very poor gross margin. Ganesh Moorthy - President & Chief Operating Officer: So, we had no large customers that are designing out because of this in any way. Steve Sanghi - Chairman & Chief Executive Officer: Yes. Ganesh Moorthy - President & Chief Operating Officer: If anything, it's a converse. We have more conversations with large customers recognizing that the combined companies, Microchip and Atmel, to them represent a much more strategic supplier to them and wanting to have more discussions in that direction. Steve Sanghi - Chairman & Chief Executive Officer: Then on the top of that the sales force is commissioned. Atmel's sales force is commissioned. Microchip is not. And we have had conversations with sales people where we say, this is a negative gross margin business. Why do you do that? Well, I'm making commission on it. You can't take it away. So as you start to interrupt that environment and start to change that culture, you will get reaction from those people. And then somebody talks to the press. That's what you have read. We are doing what our investors would want us to do, is to have three better positioning, brand, products, and pricing. Mark Delaney - Goldman Sachs & Co.: This is very helpful. And there's a couple of just very quick clarifications around Atmel. Could you clarify what sell-in revenue is next quarter? I think the $225 million to $245 million is sell-through. And then one other clarification, I think you mentioned $14 million is excluded from revenue from Atmel around the Mobile Touch. And I thought last quarter it was maybe $6 million to $7 million. And maybe just help me reconcile those two figures. Thank you very much. Steve Sanghi - Chairman & Chief Executive Officer: So $6 million to $7 million is based on sell-in and the inventory was very, very high. The sell-thorough was $14 million, or around $14 million. So that's the difference on your second question. Regarding what is the sell-in revenue this quarter, we don't care. We really don't care. We are not going to stop the channel. We are not going to make any deals; that's another thing Atmel did. They basically made deals at the end of the quarter at lower prices and make deals with the distribution to give whatever so that – given revenue could be reported. We do not care about the sell-in. We never cared about sell-in on the Microchip side. We are going to work with the distributors to create demand and sell business to end customers at better prices and whatever distributors want to stock, we don't care about sell-in. Mark Delaney - Goldman Sachs & Co.: Thank you very much. Steve Sanghi - Chairman & Chief Executive Officer: Welcome.

Next question comes from Gil Alexandre with Darfil Associates (01:01:31).

My question has been answered. Thank you very much. Steve Sanghi - Chairman & Chief Executive Officer: Thank you.

Next question comes from Mark Lipacis with Jefferies. Mark Lipacis - Jefferies LLC: Thanks for taking my question. The first one is a clarification I think. If I wanted to compare like apples-to-apples on revenues going forward, the Touch business comes out of the top line. Did you say this 32-bit PIC business comes out of the top line and the Atmel Wireless comes out of the top line going forward? And then aggregate about – could you share with us what that was in the previous quarter? Steve Sanghi - Chairman & Chief Executive Officer: Mark, I don't know how you got all that. The only thing that comes out of the top line is the mobile piece of the Touch business. We're dividing the Touch business into two portions, the automotive and industrial on one side, which we're keeping, and the Mobile Touch on the other side, which we're not keeping, which last quarter was $7 million on sell-in, about $14 million on sell-through. That's the only thing that's coming out. Nothing else is coming from the top line. I don't know how you got wireless. J. Eric Bjornholt - Chief Financial Officer & Vice President: So the PIC microprocessor that Ganesh mentioned earlier, that was a project that was in development at Microchip. That was not producing revenue. Mark Lipacis - Jefferies LLC: Okay. Steve Sanghi - Chairman & Chief Executive Officer: Yeah, so it was a brand-new initiative at Microchip. In addition to our 32-bit PIC microcontroller line we were going to develop a PIC microprocessor line, which is with their higher end cores, they don't have Flash, it goes in a different market, they use Linux operating systems. It was a very, very large investment, and Atmel has already made that investment and had significant revenue on it. So we're not going to make those investments on our sides. But there was zero revenue. There was not even a revenue on it in the next year. And then nothing comes out of the wireless. Atmel ran a very, very small wireless business out of seven different design centers and we closed one of them, which was in Germany, in a very high cost region. Mark Lipacis - Jefferies LLC: Okay, that's helpful. Steve Sanghi - Chairman & Chief Executive Officer: And we continue to sell those products and market those products. There was a very small revenue coming out of that center. So there's nothing else; it's only the Mobile Touch. Mark Lipacis - Jefferies LLC: Understood that. Thanks for clarifying. And then I imagine there will be a restructuring charge in the June quarter. Is there a way to estimate that or give us a sense to how big that might be? Steve Sanghi - Chairman & Chief Executive Officer: We don't have it. We are not giving to give you a number and then want to be limited in any way to really live to that number. So restructuring charge will be whatever it will be. Mark Lipacis - Jefferies LLC: Fair enough. Thank you.

And with no further questions in queue, I'd like to turn the conference back over to the management for closing remarks. Steve Sanghi - Chairman & Chief Executive Officer: Okay. We thank everyone for attending the call and asking some nice questions. We'll see some of you on the road. There are some conferences coming up. I'll personally be at the JPMorgan conference in Boston, and Eric, you will be... J. Eric Bjornholt - Chief Financial Officer & Vice President: So we're going to have to revisit the schedule but we're at another conference in early June. Steve Sanghi - Chairman & Chief Executive Officer: With that, thank you very much.

And ladies and gentlemen, that does conclude today's conference. We do thank you for your participation. You may now disconnect. Have a great rest of your day.