Analyst Conference Summary


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Forward Looking Statements

conference date: May 1, 2007 @ 2 PM Pacific Time
for quarter ending: March 31, 2007 (1st quarter)

Partial summary. Full summary will be available shortly after the conference ends.

Overview: Continued decline in revenues as stock-option accounting restatement process continues amid turmoil from proxy contests. All stated numbers are preliminary.

Basic data:

Revenues of $391.3 million are sequentially down 4% from $408.9 million and also down 2% from $400.8 million in Q1 2006 (excluding former Grenoble operation).

Cash position grew by $34.5 million to end at $478.7 million.


Q2 revenues to increase 1% to 4% sequentially.

Conference Highlights:

Accounting restatement process is "substantially completed," and found material restatements are necessary. Expenses for the period from 1993 to 2005 will be increased $125 million, excluding income tax adjustments. But will not file 10Q for Q1 on time. 10K for 2006 to be filed in June.

Irvine Texas wafer facility sold for $38 million.

Met upper end of revenue guidance for Q1 because of strength towards end of quarter, particularly in microcontrollers. AVR microcontrollers up 17% sequentially.

Product introctions in the quarter reviewed included optimized AVR Flash Microcontrollers for USB peripherals; a low power MCU with Ethernet and USB; a cordless phone chip; WiMAX transmitter chip; EMC transceiver chip; new RFID chip.

By business segment revenues: ASIC 28.4% or $111 million; microcontrollers 27.5% or $108 million; RF and Automotive 22.1% or $86 million; memory 22% or $86 million. Changed somewhat by moving certain non-microcontroller revenue to ASIC segment.

ASIC segment saw major decline of 13% sequentially and 10% year-over-year. Mmemory segment declined 7% sequentially due to competitive pricing environment.

By geography revenues: Asia 49.7%; Europe 36.5%; Americas 13.8%. Europe was strongest and will probably be again in Q2.

Accounts receivable decreased by $11.1 million sequentially to $215.9 million.

Long term debt decreased to $146.2 million.

Dropped out of developing new non-strategic products such as mobile phone baseband, wireless LAN, VoIP, USB, and digital audio broadcast. Focusing on microprocessor line. Continuing to reduce head count.

Plans to return excess cash to shareholders.


Microcontroller momentum? Are seeing momentum continuing in April.

Q2 seasonality? Last year Q2 was strong because of large backlog. Now inventory is balance; we are seeing real market demand. Q2 should continue to be a reasonably good quarter.

Other segments in Q2? Auto up; EE memory up; flash will be challenging. ASICs flat.

Gross margin sense? Limited in what we can share during restatement. Q1 last year margin 32.4%. Have improved at .8% per quarter for 3 quarters, so over 34.8%.

Operating expenses? Declined in R&D and SG&A compared to Q4.

Nonvolatile memory? Improving, restructuring or exiting each segments. Not in interest of announcing exits to businesses before plans have been made.

Book to bill? Guidance is based on backlog coverage, which is 81%. Backlog is higher than last quarter and plenty high to hit the guidance.

Expects microcontroller business to continue to grow faster than the company overall.

ARM 32 bit? Grew quite nicely, double digit growth in Q1.

Smart card? Declined sequentially double digits due to end market weakness. Not pursuing very low end part of market as much as in the past.

Depreciation expense? $32 million. Capital expense between $20 and $21 million.

AVR? Expects minimal double digit growth for rest of year.

Asian weakness was in communications and consumer products.

Flash ASPs? Declined 5% sequentially. Seeing that continue this quarter.

Increase in Euro to $? About $1 million impact on operating profit per $0.01 drop of dollar to Euro.

ASIC composition? Smartcards are 40%. Cell based another 40%. Aerospace and military make up remaining 20%.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but its possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2007 William P. Meyers