Good morning and welcome to the CEVA quarter four 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you. I would now like to turn the call over to Yaniv Arieli, CFO of CEVA Incorporated. You may begin.

: I will start with the forward-looking statements. Today’s conference call contains forward-looking statements that involve risks and uncertainties 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 statements and assumptions. Forward-looking statements include financial guidance for the first quarter of 2010 and fiscal ‘10, a general outlook for 2010, optimism about our royalty revenue in 2010, optimism about our growth of the cellular and home entertainment market, in particular the LTE markets, and our position within them, our pipeline, customer production schedule and our ability to generate revenues from new products and technologies. The risks, uncertainties and assumptions include the ability of the CEVA DSP cores and other technologies to continue to be a strong growth driver for us; our success in penetrating new markets and maintaining our market position in existing markets; the effects of the intense competition within our industry; the effects of the challenging period of growth experienced by industries in which we license our technologies in; the possibility that our markets for the new technologies may not develop as expected or that products incorporating our technologies do not achieve market acceptance; our ability to timely and successfully develop and introduce new technologies; our ability to continue to improve our royalty revenue in future periods; and general market conditions and other risks relating to our business, including, but not limited to, those that are described from time to time in our SEC filings. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their representative dates. With that said, I would now like to turn the call to Gideon.

Good morning everyone, and thank you for joining us today. I hope you had the opportunity to review our press release with the financial results for the fourth quarter and annual 2009. During the quarter, we achieved revenue of $10.2 million, a 5% sequential increase over the third quarter of 2009, and 2% increase compared to the fourth quarter of 2008. This revenue figure is above the mid range of our previously stated guidance, and on par with our highest revenue figure in seven years, which was recorded during the third quarter of 2008. Royalty revenue for the fourth quarter of 2009 was $4.8 million, a new record representing a 31% sequential increase over the third quarter of 2009, and 14% higher than our previous record high of $4.3 million reported for the fourth quarter of 2008. During the fourth quarter, we concluded 9 new license agreements. Six of the agreements were for our CEVA DSP core platforms and software, two agreements were for our flash technology, and one agreement for our PLL technology. Geographically, three of the license agreements were in the US, five in Europe and one in Asia. Target applications for the licenses concluded during the quarter primarily for LTE and 3G data cards and handsets, wireless machine-to-machine applications, broadband residential gateways, SSDs and SAS-based storage equipment. Our fourth quarter results were strong and we executed significant strategic event [ph] during the quarter which will have positive implication for our future, in particularly our expansion into the LTE market, the next-generation wireless technology. The licensing agreement for the fourth quarter included one key agreement with a first-tier handset maker that adopted our calls for the first time and another with a key semiconductor player in the fourth-generation wireless space that selected our best-in-breed DSP, the CEVA-XC. On…

Thank you Gideon. I will now review the results of the operations for the fourth quarter of 2009. Revenue for the fourth quarter was $10.2 million, which was above the mid range of our guidance and similar to our seven-year high revenue figure recorded during the third quarter of 2008. Fourth quarter revenue was 2% higher than the same quarter in 2008, and 5% sequentially higher than the third quarter of ’09. The revenue breakdown is as follows; licensing revenue was $4.7 million, reflecting 46% of total revenue, 2% higher than the fourth quarter of 2008; royalty revenue was $4.8 million, an all-time record high, reflecting 47% of total revenue and 13% higher than the fourth quarter of 2008. Fourth quarter royalty revenue was 31% sequentially higher than the third quarter of '09. Service revenue was $0.7 million, which accounted for 6% of total revenue and down 41% compared to $1.1 million for the fourth quarter of 2008. The decrease is associated with fewer annual service renewal agreements compared to prior years due to expense reductions taken by few of our customers. Quarterly gross margin was 91% in both US GAAP and non-GAAP basis. This represents two consecutive quarters of the same all-time record high gross margin. Quarterly gross margin was 89% for the fourth quarter of 2008. As for the operating quarterly expenses, research and development expenses were $4.4 million for the quarter, including a $0.2 million of equity-based compensation expense. Sales and marketing costs were $1.8 million including $0.1 million of equity-based compensation expenses, and our G&A costs were $1.5 million including $0.4 million of equity-based compensation expense. Total operating expenses for the quarter were $7.8 million, which included an aggregated equity-based compensation expense of approximately $0.7 million, which was slightly higher above the mid-range guidance due to…

(Operator instructions) Your first question comes from Anil Doradla with William Blair & Company. Anil Doradla – William Blair & Company: Hi, guys. Congratulations. Just a couple of questions on the new, you know, handset vendors that you talked about with LTE. Is that for a baseband, or is that for application processors?

Baseband, Anil. Anil Doradla – William Blair & Company: And so in your 2010 guidance, do you include some of that? And can you quantify how much of that will come from this Tier 1 handset vendor?

Hi Anil, this is Yaniv. I know the typical design cycle as we know in baseband is probably around a year to a year-and-a-half when those products get service side by the operators, different operators, I would guess this is a 2012 royalty opportunity, and of course the licensing revenue is something that we have recognized in Q4. So, for a longer period – Anil Doradla – William Blair & Company: Okay. And if I look at your whole year guidance, I mean, a year like 2009, at least on the earnings side, you guys grew north of 25%. Based on your new guidance and kind of the midpoint, you know, how should I be viewing the guidance? I mean, is it just pure conservativeness, or because you don't have lack of visibility on the licensing front? I mean, your guidance implies a growth which is lower than obviously '08 or '09. So, how should we be looking at it?

Yes, I think we will give second answer to the question, it’s probably more realistic and let’s all remember that we are coming out of a very difficult 2009. I don’t think anybody yet has good visibility of the ramp-up and how the economy, how the cell phone market trends will be other than general remarks about the 2010 in general, and therefore, I think we are taking both approaches. First, there are many, many moving parts in our model as you know, lots of customers, lots of design wins, lots of potential wins, and we will have to evaluate them as we go along and have more data as we go along. The fundamentals are there for sure for growth, but the magnitude with quite a few of these different segments in the market, whether it’s baseband or consumer, we will evaluate on a quarter-to-quarter basis and update the guidance as we go along. Anil Doradla – William Blair & Company: Great. And coming back to your $0.80 to $1.00, you know, kind of over the next couple of years target in earnings power, given that we're seeing an acceleration in market share on the low end market with the basebands from you guys, can you update us on that $0.80 to $1.00 guidance, and the – I think it was 35% to 55% of the worldwide market share for baseband. Do you think that's going to move sooner, or you're kind of keeping it as it is over the next two years? How should we be looking at that?

Let me start. I am not sure this is a guidance, this is more of a different tool to help yourself and others to evaluate the opportunities for us in these different markets especially baseband over the next couple of years. And I think that, that’s still in place, and the prospects of we have kind of based on new design wins that we just talked about in length, and the existing design wins which should continue to ramp up, especially in the lower end as you said, are helping us get comfortable that we are on the right track with our claim to customers. Gideon, do you want to –?

Yes, I mean, this is Gideon. One thing that I want to add to what Yaniv is saying. At the beginning of 2009, we were saying that we are expecting a Tier 1 handset vehicle to get into production, complete the certification procedure which is a tedious one, and get into the market for production. At the exit of 2009, we made significant progress, meaning all these certifications, I would say at least three – I would say all the four out of the five largest ones that we are engaged with, and the certification is behind us. And now, it’s a matter of rolling out mobiles, new mobiles that is now between the handset maker and operators or how these look like, what would be the volume. This has now become, I would say, automatic also. And that’s a big difference from our standpoint. Things will go kind of be faster, but again, it’s now demand, supply issues. Anil Doradla – William Blair & Company: Thank you very much, guys, and congratulations on a great quarter.

Thank you Anil, Thank you.

Your next question comes from Allan Mishan with Brigantine. Allan Mishan – Brigantine: Hi, guys. A couple quick ones. First, on the guidance for the current quarter, are you expecting royalties to grow in the quarter or will they be down with the consumer seasonality?

We did not receive most of the reports this time around, they were a bit late. So, we don’t have a full visibility of the quarter, but we do believe that they should grow modestly in Q1 compared to Q4. I think that we have seen in Q3 shipments a little bit of and now we see with regards to a ramp-up from post-depression seasonality and Q3 was very strong. Most of the reports from the handset side that we are seeing so far are talking about a flat to mild modest growth in Q4. So, I believe our royalties will grow, but slightly, and we don’t have the full visibility yet this quarter around, this time around. Allan Mishan – Brigantine: Okay. So if they grow slightly, then it looks like the combination of service and licensing is roughly flat the current quarter?

Well, yes, more or less, overall as you know, the visibility in the licensing is limited to the pipeline which we have, which is quite healthy, but until you change your view, you don’t have the full, you don’t have a backlog in this type of business. So, the pipeline is strong, we are seeing a lot of interest from many companies and the way we are usually budgeting and forecasting the licensing side, it is more conservative. Allan Mishan – Brigantine: Okay. And then if I look at the per unit royalty percentage for CEVA, it was about 84% for the year, and it was in the mid 80s for the whole year. Should we assume that, that number goes higher in 2010, because you might have some prepaid agreements that exhaust, or is that something that will happen beyond 2010?

Again, it’s based on very specific product line, very specific customers. I believe that we have seen in the past because this list was longer many years, few years ago, and let’s try to target at least one of these players to get out of that list, and that could be our goal, but it all depends on the specific quantities of our specific product line. Allan Mishan – Brigantine: Okay. So for now, I should assume it's roughly in the same range?

Yes, I think so. Allan Mishan – Brigantine: Okay, great. That's it for me. Thank you.

Thank you.

Your next question comes from Matt Robison with Wedbush Securities. Matt Robison – Wedbush Securities: Hi. On the new Tier 1 licensee, did you mean to say that, that is a new licensee and/or a new user of your cores? And should we continue to model rounding up to $0.05 a unit for the unit royalty? And then the last part of the question is the services have been in steady decline all year, and below last year. And it seems – you mentioned the efforts by your customers to economize. How much more do you expect them to economize? So, that's it for now.

Okay. Matt, its Gideon. Let me take the first part and then Yaniv will comment on the ASP. The result of this strategic, this a new licensee, and I should say a new user of our technology – still not new. This company will go and do this development, LTE development, I would say, year or year-and-a-half, and then it will go into production. Matt Robison – Wedbush Securities: Okay. So – and they will organize sublicensing deals for semiconductor supply, or how will that work, do you anticipate?

No, but once they, I believe, once they go into mass production and LTE becomes two markets, they have their own suppliers, and they will basically follow these suppliers to stick with us. Matt Robison – Wedbush Securities: So you'll get some follow-on licensing deals to work with those suppliers a year-and-a-half, two years from now, you expect?

That’s a plan, yes. Matt Robison – Wedbush Securities: Yes, okay.

And Matt, on the ASPs, as you know, the mix of high end and low end products, right now we are comfortable when it’s $0.05. We had agreements on product lines, which are significant higher than the $0.05. On the other hand, from the lower original cost market and the volumes there are much, much higher. So, I would say that again they would still to continue to monitor which basket it becomes more significant, the consumer or high end versus the higher volume and the low end. So, for now, I would say the mix is fine. If it changes one to the other, we will know that on a quarterly basis and probably try to analyze that trend. So, for now, we are comfortable with that, on the royalty side. And on the service side, you are right. This is what we have experienced over the last year in many companies that have, they license our technology, will have a one or two-year mandatory support. Usually, that is a reasonable time for them to finish the development of the chip, and in the past, we have seen companies continue to get support in production and utilization of improving yield. Today, when companies and customers are looking to save money in many areas, they will try to deal it internally on their own and to save the support fee that we charge annually. So, that would probably continue to erode. And I would say, probably the impact of level of under $600,000 to $650,000 a quarter is something that we are for now comfortable that we will continue to monitor the overall environment and behavior with regards to our support revenue. Matt Robison – Wedbush Securities: Okay. And I should congratulate you on your – put another $0.22 of cash on your balance sheet. DSO declined to a pretty low level for you guys. Should we – is it reasonable to read into that you've got the linearity leaves something for you to close licensing wise in the first quarter?

No. Every quarter is a standalone story and a standalone quarter. I think the DSOs are more not just a linearity, but also the maturity of the products that we have seen about few years ago. DSOs were higher because the technology was not deliberately or immediately within the quarter. Some of it’s grown, now mature and you could deliver within quarter, the payment terms are much, much shorter. So, that is main aspect and element of our DSOs. Matt Robison – Wedbush Securities: Okay, thanks a lot.

Thank you Matt.

Your next question comes from Daniel Meron with RBC Capital Markets. Daniel Meron – RBC Capital Markets: Hi, guys. A couple of questions here. First of all, was the OEM relationship that you mentioned on the LTE side, was this something that you guys had directly with OEM, or is it through the chip vendor that this relationship started?

Daniel, it’s Gideon. It’s directly with OEM. Daniel Meron – RBC Capital Markets: Okay. And I'm just curious that did you guys market the solution around – trying to educate the markets around it?

Yes we market. I mean, getting leverage. When it comes to LTE, the complexity and the investment required is in my opinion three or four times higher than 3G. Now, the OEMs are now – and we think these other way OEMs as well, are taking the extra role in developing the achievements, because they need not just to finish the – to have the chip, but also to qualify because we have (inaudible) to make sure that the network and the handsets are complying. And this is something that for advanced technology like that LTE, the semiconductor are not or do not have the value. Today, they don’t have the skills doing it. So, that’s the reason that in this particular example, the handset maker decided to do the development by themselves, to qualify, get into early production and I believe as time goes by, when the LTE volume will be above 100 million units for you. All these other semiconductor companies, Broadcom, Infineon, all these guys will step in and take you through the next level. Daniel Meron – RBC Capital Markets: Got you. Can I understand from the complexity involved with the license agreements you charge more for the license agreement itself compared to your other licenses?

That’s usually the case. We will go to new technologies where, you know, where new technologies coming out, much more advanced, powerful, and we are able to have a higher ASPs and new technologies compared to older one. Daniel Meron – RBC Capital Markets: Okay. And then just moving to the ASPs of – the royalties that you get, just trying to figure out if it was flat, slightly better or slightly down right here, I mean, for 2009 compared to last year, and how should we think about it going forward?

I think I don’t have in front of me on an annual basis. I checked in the last two quarters and it’s flat, it’s $0.05, could be the math quite easily offline as the numbers aren’t there. I don’t see a – I don’t anticipate a big change in ASP compared to 2008. The mix in ’08 is probably more towards consumer or slightly high towards consumer. 2009 by far close to 66% to 68%. Our handset, we know and we heard another big player yesterday talking about the emerging market ramp-up and the low-cost market ramp-up is faster and that changes a little bit of the mix, but bigger volumes, and as we saw, overall higher royalties for CEVA. Daniel Meron – RBC Capital Markets: Okay. And how far advanced are you guys with the ramp up going on with Nokia, both in the low end, low-priced handsets for emerging markets, and with the higher-end solutions as well? And if you can just elaborate with additional places that the ramp up is needed to be fully reflected in your royalty streams.

Yes, you know, our habit is not to convey specifically about a customer or product line. I think that the overall trend is an important one, and I will leave it to you to do some of the homework of the well-known great design wins and public information that is out there. For many years, Nokia went with TI only, quite a few different press release and product introduction happened in 2009, probably the later part of Infineon and Broadcom, SDE and VI CDMA has announced design wins with Nokia just at the end of November. There were 5 new models introduced by Infineon, and we will have to watch our customers carefully, but the potential there of course is huge, as Nokia still is Number 1 with shy of 40% worldwide market share, a big, big portion in ultra low-cost market. Some of the comments that they have made in the last month or so are, I mean, quite robust about the lower end side of their business. Daniel Meron – RBC Capital Markets: Okay. And then a last one from me – uses of cash – I mean, you have got $100 million. I know that this question comes up. But just curious if there's any update on that. If it's piling up, you know, it is quite impressive size of a cash pile compared to the size of the company. Any thoughts on that?

I do think that we have changed our thoughts with regards to that idea that we have been pushing in and struggling over the last couple of years, continue to make and build a profitable company which is sustainable in the longer term, this is what we have done. And of course, the positive side of it is you also generate a positive cash flow and a pretty significant amount. We have the right ingredients for the next couple of years to take this company higher into the next notch and step with internal progress and not something that’s unique to buy or look for M&A opportunities. But that said, if you do find something that makes sense, it’s synergistic to our customer base or technologies, that is the probably the right use of cash within the licensing business model of journey, 90 plus percent gross margin versus 1% in the bank. So, I think that’s still our goal, to try and see if something like that could be found. I don’t think this is something that is going to happen over the next, although on the short-term but if something pops up, we will look and see if it makes sense for us. Daniel Meron – RBC Capital Markets: Okay, thank you. Congrats on the solid execution, Gideon, and Yaniv. Good luck going forward.

Thank you.

Sure Daniel.

Your next question comes from Doug Whitman with Whitman Capital. Doug Whitman – Whitman Capital: Congratulations

Thank you Doug. Did we lose Doug?

Doug, you may have muted your line. Doug Whitman – Whitman Capital: Can you hear me?

Back to yes. Yes. Doug Whitman – Whitman Capital: Okay. Congratulations on a strong quarter. And thank you for the strong results, again. You know, you grew $16 million year-over-year in cash. And so, with tax rates going up, following up on the last question, has there been a thought much in consideration, and if not, would certainly urge you to think about if not stock buybacks or some dividend for the shareholders, because it looks like dividend rates may be going up next year. So it certainly would give or take $100 million is an impressive amount of cash where you might pay back some of the shareholders, long term shareholders with some dividends. So, it's a basic point I just wanted to make.

Thanks Doug. This is a legitimate possibility of use of cash. And we have discussed it internally already to the board, and I don’t know what the overall answer would be, but one of the possibilities of use of cash. Doug Whitman – Whitman Capital: Well, it's pretty impressive you got $5 a share in cash, so congratulations.

Thank you.

Thank you.

At this time, there are no questions.

Okay. And thank you for joining us today and for your continued interest in CEVA. We’ll be attending two events next month, and we invite you to join us there. The first will be the annual largest Mobile World Congress in Barcelona, Spain. That’s on the date of February 15th to 18th, and following that is the NASDAQ and Oppenheimer Joint 14th Annual Equity Conference in New York on February 23rd to 24th. Thank you and good bye.