Good morning. My name is Cynthia and I will be your conference operator today. At this time, I would like to welcome everyone to the CEVA fourth quarter 2008 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. I’d now like to turn today’s call to Mr. Arieli, Chief Financial Officer of CEVA. Please go ahead sir.

Thank you. Good morning, everyone and welcome to CEVA’s fourth quarter 2008 earnings call. Today’s conference call includes forward-looking statements that involve risks and uncertainty, as well as assumptions, that if they materialize or prove incorrect could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statement and assumption. Forward-looking statements include financial guidance for the first quarter of 2009, general outlook, and optimism about our royalty revenue growth, market position in the handset and consumer electronic markets and industry migration to our DSP cores and technology in the handset markets. Our ability to recapitalizes in the 3G trend and the trend towards the merchant solutions and the new mobile multimedia platform and our projections about customer’s production schedules. The risks, uncertainties and assumptions include the ability of CEVA’s DSP cores and other technology to continue to be a strong growth driver for the company, the continuation of our market position, they ability of our reduction in overall 2000 expenses to produce and intern benefit. The effect of the intense competition within our industry, the possibility that the markets for our technology may not develop as exceed or expected, to possibility that our customer’s products incorporating our technologies do not succeed as expected. Our ability to timely and successful develop and introduce new technologies, our reliance on the revenue derived from the limited number of licensees, our ability to improve our licensing and royalty revenues for future period and general market conditions. For more information, please refer to the risk factors described in our 2007 Form 10-K or other prior SEC filings. CEVA assumes no obligation to update any forward-looking statements or information, which speak of their representative dates. This conference call will be conducted call will be conducted by Gideon Wertheizer, Chief Executive Officer of CEVA and myself, Chief Financial Officer of CEVA. Gideon, will cover the business aspects and the highlights from the quarter, while I will cover the financial results for the fourth quarter and fiscal 2008, as well as financial guidance for the first quarter of 2009. With that said, I would now like to turn the call over to Gideon.

Good morning to everyone and thank you for joining us today. I hope you had the opportunity to review our press release with the results of the fourth quarter and fiscal 2008. During the quarter, we reported total revenue of $10 million, which represent a 21% increase over the fourth quarter of 2007. Royalty revenue for the fourth quarter of 2008 was an all time record high of $4.3 million representing a 30% sequential increase as compared to the third quarter of 2008 and 41% higher than the royalty revenue for the fourth quarter of 2007. During the fourth quarter, we concluded six new license agreements, all of which were for our CEVA, DSP cores platforms and software. Geographically, four of the license agreement were in Europe, one in Asia and one in the U.S. Target application for the license concluded during the quarter are mainly for 2G and 3G handsets, smartphones and mobile multimedia products. The fourth quarter results introduced a new major milestone for our royalty revenue. For the first time in our history, royalty revenues shot-up to the $4 million benchmark to reach to a record of $4.3 million. This reflects a significant growth in the shipment of new advanced 3G phones and smartphone enabled by our technology. Also during the quarter, we had a substantial royalty contribution from an OEM of a well known new portable consumer product that started shipment during the quarter. This shipped product is the newest generation of an existing product that is the key leader in its product categories and has been sold in high volume for the past three years. The later version of this product includes advanced multimedia capability for the first time, which is powered by our DSP technology semiconductor. We believe this new business segments further highlight…

Thank you, Gideon. I’ll now review the result of operations for the fourth quarter of 2008. Revenue for the quarter was $10 million similar to the third quarter 2008 level and 21% higher than the $8.2 million for the fourth quarter of 2007. The revenue breakdown was as follows, licensing revenue was $4.6 million reflecting 46% of total revenue and 15% higher than the fourth quarter of last year. Royalty revenue was all time record high of $4.3 million reflecting 43% of total revenue and 41% higher than the fourth quarter of 2006. Service revenue was $1.1 million reflecting 11% of total revenue and 7% lower than the fourth quarter of last year, which had $1.9 million. Quarterly gross margin were 89% on both U.S., GAAP and non-GAAP basis for both 2007 and 2008. As for the operating expenses, the research and development costs were $5 million for the quarter including $0.3 million of equity-based compensation expenses. Sales and marketing costs were $1.7 million including $0.1 million for equity-based compensation expenses and our G&A cost were $1.6 million, which included $0.4 million of equity-based compensation expense. Our total operating expenses for the quarter were $9 million, which include an aggregate equity-based compensation expense of approximately $800,000 and a one-time reorganization charge of about $600,000 associated with the recent cost cutting measures taken to better align our ongoing expense relating to the SATA actives was overall revenue contribution. Total operating expenses for the fourth quarter excluding equity-based compensation expenses and a one-time SATA reorganization charge was $7.6 million, similar to the third quarter level and significantly lower than the average run rate of $8 million that’s we recorded for both the first and the second quarter of 2008. U.S. GAAP operating margins for the fourth quarter with the loss of 2008…

(Operator Instructions)Your first question comes from Matt Robison - Pacific Growth Equities.

First of all, what was your headcount?

We have 175 employees worldwide after taking into account, all the activities in the down sizing we talked about.

When you look at the royalties and the unit shipped, they were down year-over-year. What was the reason for that? I know that there are paid royalties or those units that have paid royalties were up, but the overall member was down?

I think you answered yourself. The most important aspect is there the 20% gross in our customers that are paying royalties. The ones that are under prepaid or some old arrangement that, whether it’s the economy or just failing out of some of this product line, and that number has decreased. So on full paying royalty units we have increased both year-over-year 25% and sequentially 20%.

The handheld product you talked about, it sounds like it gained consoles. Was that the royalty that you saw for the fourth quarter? Was that royalty that filled the supply chain or should we look for that to continue to grow in your perspective, this quarter?

Yes, the initial ramp-up happened in Q3, which we recorded in Q4 and we continue to expect that specific product line to continue to grow quite significantly.

I recognized the challenges of trying to close deals and every company is talking about stretching sales cycle and so forth and that’s clear in your commentarial figures, relates the licensing, but you mention your pipeline was still strong. Is it a strong as strong as it was three moths ago the range of licensing opportunities?

Yes Matthew, to you an answer, yes. The pipeline is as stronger as it used to be, the concern that we have is that the decision you pinpointed, the decision process that could be lengthened because people are more concerned.

Now, your royalties even though a lot of companies did see fairly strong activity in the third quarter and all, all that really troubling guidance that we are seeing in the semiconductors business had to do with the March quarter. Even though that we already saw some pretty decent numbers for the third quarter that would lead to your December quarter results in terms of royalty accounting, you still had much stronger percentage growth than I think the industry would imply. Is that just because within the customers you have, your products are in earlier stages of growth and so that you are growing up of relatively small numbers still in the market share within your customers? If that’s the case, is the adoption early enough so that you can continue to grow units in the first quarter?

It’s a complex question and as we all know, there are so many different aspects to it and moving pieces that I’m not sure there is one right answer. Of course, there are a quite a few new products introductions like one that we mentioned, the portable device that we mentioned. They are net books and notebooks that they came out to the market and are coming now to the market including Toshiba, Dell, which are the new product introduction us and there also more matured product lines for us both in the cellular industry, and of course in the consumer electronics relates to DVD set-top box, flat screen TV type. I think though all of the different segments. Our Q1 royalty number will be lower than the Q4 royalty numbers, you will not reach the $4.3 million because of the Christmas season and the very difficult Q4, that’s specifically for Q1, but in an overall yearly basis and taking into account the ramp up and then a lot of these new products and some of them are very high in volume type of products. We are quite confident that in an annual basis we should see continued growth like we have seen over the last two years. I’m not sure it’s in the same magnitude or not, time will fall. That’s for sure the royalties need to continue to grow.

Yes, let me just add few more quotes. First of all 3G becomes now a contributor to our royalty strength. If you go to the market 3G phones, the advanced one, the one that are coming from the leading companies, our VSL technology and this was not the case and this is now growing in more substantial way. So, 3G phone, 3G market, 3G plus is the market that we are looking forward and expect to see everything. We also have the mobile multimedia and the invention, we have three or four customers now starting to shift product and this will take us further in 2009.

The lower end of products, we have companies like ZTE and the new ultra low costs products from Nokia, have they start to registers significantly?

I wouldn’t say significantly. You’ll see the ramp-up growing and it will progress. We know the pipeline will start with few hundreds and then going to few tens of thousands and then it seems to go in right direction, we see this patterns going forward. In general, in China market with the expectation and (Inaudible) that the markets will grow. They speak about 7.7%, handsets in China specifically and we will be there with our customers.

The product like the NXP earphone chips, that’s really more in a new cycle of 2 and 2.5 G phones, right?

Telephone is an interesting product, because it’s a major part, as well as we can understand the Samsung product. Samsung is now increasing Dell chare, in the local phone. There was the $100 phone, coming down to $70, now going to $50 a phone; it is based on that as well.

Right, but that’s only been the royalty contributor for a few months for you guys, right?

Yes, it’s still not at the level, but it’s as far as we understand it’s a major elements in Samsung strategies to compete with Nokia as a branded low-end market in China.

Your next question comes from Vijay Rakesh – Thinkequity. Vijay Rakesh – Thinkequity:

We don’t have specific, because they are various design wins and we don’t know exactly, there is a pattern there. As far as we can understand this market will go 50%, but today we are at 10 MSI. I see her that net book has occupied LG, Toshiba. That’s kind of from the back on my mind. Vijay Rakesh – Thinkequity: Will it be like 25% of the net books, is that a fair assumption if you had in Dell MSI. Is that probably the major ones?

Maybe when we talk about the overall invested potential, what we are seen HSDPA like Ericsson platform, shipping in Dell and in a meaning nine for example. This has now given in the U.K. wireless phones through to phones of fully to the first three months. So, all the numbers right now is connecting this type of medium type and then net books are expected to grow quite significantly over the next couple of years. I believe we saw 400 million by 2012 or 2013.

Vijay, I want to draw attention to the announcement that is made by Intel and Ericsson. The Intel strategy, when they want to combine in the motherboard chipset, that we’ll have the 3G side. They’re focusing on the WiMax, but to get foothold in 3G specialty they had to adopt a partner and this partner is a customer for us. At the context based on chips and wireless connectivity we have both.

Going on to the handset side outside Apple, can you give us a little bit more color on Nokia. I mean how many units on the ultra-low-cost are they looking to ramp in 2009 versus 2008?

We cannot be specific, the only thing that we can say as far as we knows they are currently two models out there 1202, 1203 this are low cost developed $20 phones and as far as we know there are other mobiles now ramping up in production, but we cannot be specific on the quantity.

Previously they have said 80 million units for 2010, you think there is a change to that or --?

From Nokia this is the biggest segment, last year they had lost $200 million in the low end type of phone. This is their biggest market and from the first Nokia phone it result the IP based essentially. So, the ramp will be significant, we do know exactly yet the color and the magnitude and we just know that has began, there are tow and potentially more designs in the queue, but right now two design that already out there shipping and we will monitor their success through our royalty reports and other data points.

Today in the ultra-low-cost segment and as far as we know, the ultimate bumps, build of material is $8 million, you can get to $8 million only with two solutions today. They have a phone that we brought new exit to; these both are based on our technology.

Okay and one last question, on the OpEx side you said $1 million reduction on OpEx. Is that effective from the first quarter of year, so the March quarter going forward?

Yes, potentially, yes the $1 million is throughout the year, starting in Q1. It will get a range for Q1 operating expenses, but it’s going to be contributed throughout the year.

Your next question comes from Daniel Meron - RBC Capital Markets.

Just I wanted to clarify a few things. I might have missed it earlier. When you think about 2009 obviously usually the December quarter and the March quarter usually the strongest ones, how much would you guess for the March quarter is coming from licenses? Is that a base to build some in last quarters and then what kind of variability could we be expecting into licensing business? If you can just give us a little bit more color on how the outlook might checkout?

.: I don’t think there was anything special in this first quarter guidance. These are the regular guidance that we are giving. Q1 we have a good pipeline, a very strong pipeline as Gideon mentioned earlier and other than that there is nothing that has changed in the business practices.

Okay, but we are assuming typically March quarter is usually one of your strongest quarter’s given the fact that you report numbers with lag of one quarter over the Holiday season and you still think that royalty is coming down. So what is the basic that we should think about for 2009 as a whole and to what extent do you think there is more delta to the licensing business. Down the road it is pretty much were thing should kind of stabilize?

Let me try to explain this again. On an annual basis, we can’t do what we explained. The economy and visibility that we have for the latter parts of the year, but we just think it’s not prudent to give guidance because of the question mark out there. For the quarter, the story is different. We have a pipeline; we have customers that are negotiating with us. We have customers that are evaluating our technology as we speak. This is a normal type of visibility and guidance that we only give. So, unfortunately this time around we cannot give you, and we decided not to give the annual guidance. I cannot quantify about the licensing and about the royalties other than what we have already said that the royalty. You saw how we ended up the year and all the potential design wins and ramp-ups that we have, that we think that’s what going to be a significant contributor both on an annual basis as well as in the Q1 basis, but not as high as the record number we came up during the last quarter. You are right, but usually Q1 is strong in royalties, because it would prevent the Christmas sales, which is the quarter of the year. Unfortunately this is not the economy or the situation that we are facing right now in Q4 shipments. I hope, I gave you some color there.

Yes, that’s fair and then the next question relates to the cost containment measures of $1 million. Again I might have missed it earlier, but what kind of measures you’re taking? What’s the change in the headcount here? What are the measures you’re implementing? When are we expected to see the impacted so far over in the March quarter or did you restart it in December quarter? What’s the base that the company requires or what is the underlying assumption in your current cost structure?

Yes, so we have talked about that, we guided non-GAAP $7.2 million to $7.8 million for Q1, that takes into account the cost cutting measure that’s we have taken today after taking that those actions were 175 employees worldwide. We have aligned some of our stock activities to be less service oriented in more IP royalties high margin oriented like we have done without other parts of the business, which in 2008 contributed very nicely. That’s some thing that we also want to give more emphasis on this type of business specifically, so that’s what favors on an annual basis, quite a few $100,000, compared to FX, compared to other expense measures and costs measures that we have taken and what’s for a long time, we’ve always been quite to lenient as much as we can. We came out for about $1 million on an annual basis, but we’ll start immediately.

What was the headcount before these trends?

At the end of the last quarter, we were 180 people worldwide.

Okay. So you just changed in the headcount. It’s more change in the processes and organizations.

Yes, in our overall non-GAAP expenses, last two year $31.1 million operating numbers and $4.6 million in cost of goods. From these two numbers, we are planning on reducing about $1 million for this year, ’09.

And then the last question from my end. Can you give us a little bit sense on what is out of the royalty revenue? How much of that is based on handsets, how much of that is the gain costs that you mentioned before and how should we think about going forward? Also in this respect if you can just give us a little bit more color on the one that you talked about?

Okay, so if 55% handsets, how much was the rest of that’s communication etc.--?

The rest of the consumer electronics are the DVD, set-up boxes, hardest drive and portable multimedia player. I don’t have a specific breakdown between TVs and DVDs and set-top boxes, but all the other consumer electronic devices fall in the 40% to 45%.

Your next question comes from Bob Sales – LMK Capital Management. Bob Sales – LMK Capital Management: Hi, just a few questions. The $84 million in cash in short-term investments, what do you think your plans with that cash are for the next year or so?

First of all, we are focusing than on growing our business and of course the shareholders value and our daily practice is aimed first and most important positive cash flow generation, this is on the business front. In terms of the cash as we mentioned earlier, the board have adopted $1 million share buyback program which is in process at these days this is something that we’ll continue to execute and have rest for a longer-term more strategic opportunity and goals. Bob Sales – LMK Capital Management: The last thing you said the strategic opportunities. Are you actively looking for strategic acquisitions and the types of acquisitions you’re looking for are in what type of range in terms of cash consumption?

I wouldn’t use the term (Inaudible) intensively. We are exploring, we are monitoring the markets and that’s suppose to answer your question, if IP is the segment that we believe we should focus and when we fell that this make sense and also derive valuable positions to our shareholders, we may do something. Just exploring not intensive looking or --. Bob Sales – LMK Capital Management: Well I only asked a question because, my concern would be using a significant chunk of that cash and then making a mistake in terms of an acquisition that doesn’t work out because at this point cash makes up two thirds of your equity value which we would use a high level or security as shareholders.

When we fully understand and I think I agree with your assumptions here as well. Bob Sales – LMK Capital Management: The second question that I had is that the cash that you have, it looks like you’re yielding somewhere in the low 2% annualized interest rate on it. Where is that cash invested and in what types of securities?

Our investment policy allows us only to invest in a corporate bonds with A rating, so that’s onto different A rating, but nothing less anything below that needs a special audit committee and investment committee approvals and that’s rare and we have allow mainly investing CDs and deposits. I would say right now the average majority of a short around the year or so, shot of 12-month and if you recall we mentioned about $700,000 of unrealized loses at the end of September of last year, at the end of December of last year. That number was 170,0000, so as of today we are not aware of any special problem the write-offs or any concerned that we have with any of our corporate bonds.

Okay and then in the handset business, you mentioned that it was about 55% that was of your royalty revenue?

That’s correct and some of the overall licensing revenue maybe somewhere around 60%, 65% coming from the handsets. Bob Sales – LMK Capital Management: The handset revenue has been running at what percentage? The handset royalty revenue has been running at what percentage of total royalty revenue during 2008? Is it been about 55% roughly?

Yes. Bob Sales – LMK Capital Management: So, given that you are in the base band suppliers that are likely to gain share through 2009. Do you expect that your handset revenue, royalty revenue will ahead in inflection point, where it becomes a much larger percentage of your royalty?

I think that in 2009 there should be trend, I am not sure if it’s the major, but there should be trend of increased portion of our handsets business because the volumes. We are talking about volume mainly, the volumes are very significant and on the other hand what we could see down the road maybe 2010 and 2011 is the shift back tools and more consumer electronic devices, which we have done quite nicely over the last three years of finding new deals and in 2008, ending the 2008 the first four multimedia type of devices that came into production. So for now, those portions of royalties were very minor, but going forward and with the ramp up of some of the new devices, that should kickoff probably strong in 2010 from the market share enhances.

One more note. Usually the royalty from hand set is between $.05 to $.10 well as the consumer product is between $0.8 to $0.15. So, the royalties coming for the consumer markets is higher, though the volume is not as big in handset. Bob Sales – LMK Capital Management: Give that TI has made has made pretty clear that they are putting less emphasis on the base-to-end market and that gap looks to filled and free scales in trouble. So, that gap looks to be filled by the players that are using your IP. Why shouldn’t we expect a more pronounced inflection point in your handset royalty revenue at some point in the next 12 months?

It’s just a method of guidance. Let’s take TI for example, they said they are exiting they are not exiting now from their market, it’s a process because there is customer to support and I believe that customer that used to work with TI is reached to during streamline and XP (Inaudible) coming out there into few of our technology, but the process of qualifying QA ,certifying hence it not takes time to take the QA year, it could take 16 months and in the case of Nokia it was end up in three year segment and Nokia, it looks like we are under be prudent, but it takes time and that’s the reason that the inflection point is not immediately after TI announcement, but in a year or two. Bob Sales – LMK Capital Management: I’ll ask one more question and I’ll hand over the mike. Do you have something you could communicate as a fair market share that you think you could have obtained in handsets as you look out 12 to 18 months?

Yes, I think we said this not once and not thrice if we look 24 to 36 months down the road, not 12 months. We believe that with all these different design wins that we talks about and you’re aware of we should be able to read somewhere between 30% to 50% of their worldwide market and base band market over the next two to three years. Bob Sales – LMK Capital Management: And that’s versus what today?

That’s around from about 12%-13% today.

Your next question comes from the line of Robert Katz - Senvest. Robert Katz – Senvest: I have a question, what will the impact of the set will be on the OpEx in the upcoming year? How much of that have you already hedged out and how long does that hedge go out?

It seems good question, I forgot to mention that. Essentially the $1 million that we gave already takes and bakes into account all different cost savings that we are planning. That also includes the FX and I would say that if you are essentially covered for the entire 2009. So whenever it goes up and down, our budget and forecasts takes all that into accounts. Robert Katz – Senvest: And what types of your hedge?

You don’t hedge your full year in a single day. You do that on an ongoing nine to 12 months basis. So some of it is at 3.7 and some in the latter quarters ends at high as 3.9 to 4 shackles per dollar. It’s continuously improving throughout 2009 and because we do our hedging again on an ongoing basis. Robert Katz – Senvest: Okay and I would assume that going forward now that’s its stop all you’re hedging till 2010?

Not yet -- Robert Katz – Senvest: Sure, another question. Your mature stock-based compensation is pretty high. How many options do you issue in a given year and how many options are in your option pool?

In previous year in 2007-2008 we have issued one to two employees somewhere about around 500,000 to 600,000 shares a year. This is going to drop significantly in 2009 probably by half and our current expenses are somewhere around $700,000 a quarter for a 123R and the pool as of today has about 1.4 million option ongoing. Robert Katz – Senvest: Alright and in terms of the share buyback, are you still active in that in this market, this prices given your performance or with the economic uncertainties have you pullback from that?

No we have the program, we are active with the program, and we’ll continue to be active with the program based on the rule that exist out there. Robert Katz – Senvest: And you’re nearing the end of that program, do you have to go back to and I guess you have to get government approval to get another buyback program in place?

Not government, but board approval you may. Robert Katz – Senvest: Board approval?

Yes, that’s correct as soon we neutralize the quarter or a million shares that’s derived there we will convince the board and discuss about the next plan. Robert Katz – Senvest: Just in terms of stepping back a bit, it seems like there is great growth opportunity from handset business, even though there is some pressure on it in the near-term and CE business you have great footprint and when that recovers, that should drive revenues. Are there any other growth drivers outside of, I guess also highlight is the HSDPA, LTE market, but are there any other markets that would be high volume markets?

Yes, I think I mentioned it in my prepared remark. If you take adjacent market for cellular because on femto cells, the MIDs, I think I was asking question about the net book market and I said that when it comes to the net book that are going to be a 3G based or wideband CDMA based. We will be there to get Intel with the FM chip. These are just cellular related activities from our (inaudible) because we are using the same technology that we also. In consumer electronic, game consoles it’s a market, consumer product is a substantial opportunity for us, a set-top box, DVD, Blu-ray DVD. Even DVDs, that are now being upgraded and going to areas like China or India and this is the growth eventually for the DVD supplier. So, these are our territories that we have in place. Going forward, we are looking into the LTE and WiMax store and that’s keep watching us on NWC and see what are we going to do. Robert Katz – Senvest: In terms of number of units, if you aggregate all these end markets and the number of units you’re chasing right now, what would you say the total adjustable unit would be for looking out here?

If you compare to cell phone is the one billion units and just MID and net books is 300 million units. We are talking about 2 billion unit’s adjustable market. Now, the handset market 1 billion units a yield, but handset market today had 4 billion handsets worldwide. So still two billion people don’t have handsets and can go and buy this $20 of local phone. These four billion units are going to replace these phones.

At this time, we have no further questions. Management, are there any closing remarks?

Yes, thanks again for joining us today and for your continued interest in CEVA. We’ll be showcasing our upcoming Mobile World Congress in Barcelona, this is a 3GSM show in Spain on February 16 to 19, we have a nice booth and nice demos, technologies up there are going to be shown and released there and we invite you to join us there in Barcelona. Thank you and good bye.

Thank you for participating in today’s CEVA fourth quarter 2008 earnings release conference call. This call will be available for replay beginning at 11:00 a.m. Eastern Time today till 11:59 p.m. Eastern on Tuesday, February 10, 2009. The conference ID number for the replay is 79622372. Again the conference ID for the replay is 79622372. The number to dial for the replay is 1800-642-1687 or 706-645-9291. This concludes today’s call. You may now disconnect.